THE IMPACT OF FINANCIAL DEVELOPMENT ON THE ENVIRONMENT: EVIDENCE FROM CHINA

With well-developed financial, it has become a hot topic whether financial development affect the quality of the environment, but the relevant literature is limited. In this paper, empirical approach is taken studying the relationship between financial development and environment quality, mainly using ADF, cointegration and Granger causality test. The model is established between carbon dioxide emissions and financial development based on the environmental Kuznets curve. The results reveal that the financial development is the Granger cause of CO2 emissions and suggest that financial development in China has not taken place at the expense of environmental pollution. On the contrary, it is found that financial development will lead to a decrease in environmental pollution if financial development is at a high level. It is concluded that carbon emissions are mainly determined by income.