Financial inclusion and carbon emissions in Asia:Implications for environmental sustainability

This study explores how carbon emissions are affected by financial inclusion.Using a balanced panel data set of 26 Asian countries,we compute a composite index,through the principal component analysis(PCA)technique,of financial inclusion based on a set of attributes related to financial inclusion.Our main analysis also delineates the subsamples of developed and developing Asian economies.The results reveal a long(short)-run positive(negative)impact of financial inclusion on carbon emissions across the Asian countries.This finding is also true for the developed country subsample,implying nonlinearity in shortand long-run relationships.For the developing countries,a more pronounced long-run positive impact compared to developed countries is found.Furthermore,the pairwise causality test results indicate the existence of bi-directional causality between financial inclusion and carbon emissions.These findings have important policy implications,especially in the context of the strategic integration of financial inclusion and climate change strategies.