The spillover of financial development on CO₂ emission: A spatial econometric analysis of Asia-Pacific countries

The consequences of spatial association of CO₂ determinants are discussed in this analysis, considering pollution control's significance. Six financial growth metrics were analyzed using data from 31 Asia-Pacific countries from 2000 to 2018. The spatial econometric models used in this paper, in a novel contribution, make it possible to study comprehensively the direct and spillover effects of financial development on CO₂ emissions regionally. The presence of the spatial Durbin model was verified by diagnostic testing. The findings demonstrate that the logarithm of GDP per capita, trade openness, urbanization, and energy intensity have beneficial and essential effects on CO₂ emissions. The efficacy of the components assessed for financial growth in the various models. The lack of consideration of the spillover consequences of economic growth to boost energy quality, based on the findings, contributes to skewed estimates and negligible coefficients. The ultimate results illuminate that all six financial growth metrics are becoming relevant and stimulate an increase in CO₂ emissions, while their spillover effects are adverse as energy quality is increased. The analysis of spatial influences illustrates the importance of adjacent countries' effects on a country's CO₂ emissions. The overall findings suggest that as demand and financial growth in neighboring countries increase, CO₂ emissions decrease.