Does Financial Liberalization Affect Environmental Degradation (CO2 Emission and Ecological Footprints)? Evidence from South Asian Economies

Abstract

This study aims to explain the effect of financial liberalization on environmental
degradation (CO2) emissions and ecological footprints in the South Asian Economies using data over
the period from 1980 to 2017. The fully modified ordinary least square (FMOLS) and dynamic
ordinary least square (DOLS) techniques have been used to examine the effect of financial
liberalization on environmental degradation (measured by CO2 emissions and ecological footprints).
Findings show that financial liberalization does not significantly affect carbon dioxide emission,
however, the positive and significant effect on ecological footprints is evident. Financial liberalization
is a driving factor for economic growth but it is not better for environmental sustainability. This paper
has a significant contribution to the regional ecology and also has important policy implications for
promoting a sustainable environment in the South Asian Economies.