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Environmental quality indicators and financial development in Malaysia: unity in diversity


Alam, Arif and Azam, Muhammad and Abdullah, Alias and Malik, Ihtisham Abdul and Khan, Anwar and Tengku Hamzah, Tengku Adeline Adura and Faridullah, Faridullah and Khan, Muhammad Mushtaq and Zahoor, Hina and Zaman, Khalid (2015) Environmental quality indicators and financial development in Malaysia: unity in diversity. Environmental Science and Pollution Research, 22 (11). pp. 8392-8404. ISSN 0944-1344

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Abstract

Environmental quality indicators are crucial for responsive and cost-effective policies.The objective of the study is to examine the relationship between environmental quality indicators and financial development in Malaysia. For this purpose, the number of environmental quality indicators has been used, i.e., air pollution measured by carbon dioxide emissions, population density per square kilometer of land area, agricultural production measured by cereal production and livestock production, and energy resources considered by energy use and fossil fuel energy consumption, which placed an impact on the financial development of the country.The study used four main financial indicators, i.e., broad money supply (M2), domestic credit provided by the financial sector (DCFS), domestic credit to the private sector (DCPC), and inflation (CPI), which each financial indicator separately estimated with the environmental quality indicators, over a period of 1975–2013. The study used the generalized method of moments (GMM) technique to minimize the simultaneity from the model. The results show that carbon dioxide emissions exert the positive correlation with the M2, DCFC, and DCPC, while there is a negative correlation with the CPI.However, these results have been evaporated from the GMM estimates, where carbon emissions have no significant relationship with any of the four financial indicators in Malaysia. The GMM results show that population density has a negative relationship with the all four financial indicators; however, in case of M2, this relationship is insignificant to explain their result. Cereal production has a positive relationship with the DCPC, while there is a negative relationship with the CPI.Livestock production exerts the positive relationship with the all four financial indicators; however, this relationship with the CPI has a more elastic relationship, while the remaining relationship is less elastic with the three financial indicators in a country.Energy resources comprise energy use and fossil fuel energy consumption, both have distinct results with the financial indicators, as energy demand have a positive and significant relationship with the DCFC, DCPC, and CPI, while fossil fuel energy consumption have a negative relationship with these three financial indicators.The results of the study are of value to both environmentalists and policy makers.

Item Type: Article
Uncontrolled Keywords: Environmental quality indicators; Air pollution; Financial development; GMM technique Malaysia;
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HG Finance
Divisions: School of Economics, Finance & Banking
Depositing User: Dr. Muhammad Azam
Date Deposited: 04 Oct 2016 03:19
Last Modified: 07 Dec 2016 01:11
URI: http://repo.uum.edu.my/id/eprint/18735

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