Financial Development and Environmental Degradation in the South Asian Region

Abstract

This study evaluates the possible long-term effects of financial development on environmental degradation. It emphasizes how financial development, institutional structures, and foreign investment determine the level of green development. The research uses the deductive approach. The data is extracted from the World Bank Statistics. The sample comprises seven countries in the South Asian region, and information is gathered from 2000 to 2020. Foreign direct investment, broad money supply, and domestic credit to the private sector are used to evaluate financial development. Energy use, CO2 emissions, greenhouse gas emissions, and the depletion of natural resources are used to measure environmental degradation. The data are analyzed using panel data linear regression analysis. The researcher’s findings conclude that Financial Development has a negative relationship with the four measures of Environmental Degradation in the South Asian region. This article reviews the relationship between financial development and environmental degradation in South Asia. In contrast to previous literature, the authors provide a broad money supply as an economic development variable instead of bank credit to the private sector. Also, this article reviews recent data up to the year 2020. Future researchers can develop an alternative methodology to study only using secondary data, and future researchers can use primary data for this type of study.