IS FINANCIAL DEVELOPMENT IN MALAYSIA GREEN? AN EMPIRICAL ASSESSMENT OF EKC HYPOTHESIS

Understanding the interaction between Carbon emissions and the components of financial development is of great importance in order to formulate proper sustainable development policies. More importantly, the assessment whether the status of financial development in Malaysia is green or not. The current study is different from the previous study in this area where this study taking into account 3 different types of financial development, i.e., foreign investment, domestic investment and private investment. Henceforth, the current study utilises quadratic model and F-bounds assessment based on the ARDL context to Malaysian Carbon emissions, foreign direct investment, domestic investment, and domestic credit to private sector time series over the period 1970-2018. Results from the F-bound co-integration analysis confirmed the existence of a significant U-shape inversion via quadratic correlation between the emissions of carbon and domestic investment in the long run; however, the role of other financial development indicators was found insignificant. These results imply that Malaysia is moving towards green financial development with the existence of technological effect on the development of Malaysia domestic investment in the near future. (C) 2020 Published by European Publisher.