The environmental sustainability effects of financial development and urbanization in Latin American countries

Abstract

The present study assesses the impact of urbanization, economic growth, energy consumption, and financial development on CO₂ emissions in Latin American countries using a dataset spanning between 1980 and 2017. The current paper employs utilized panel econometric techniques such as CIDF, panel unit test, the Westerlund panel cointegration, fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS), and Dumitrescu Hurlin panel causality test to assess these associations. The outcomes from the FMOLS and DOLS estimation reveal that (i) economic growth impacts CO₂ emissions positively, (ii) energy consumption exerts a positive impact on CO₂ emissions, and (iii) urbanization impacts CO₂ emissions positively. Furthermore, the outcomes of the causality test reveal that energy consumption and economic growth can predict CO₂ emissions in Latin countries. The findings highlight the importance of policymakers actively coordinating strategies to address Latin America's severe environmental degradation.

Keywords: CO2 emissions; Economic growth; Energy consumption; Financial development; Latin America; Urbanization.