Remittances, Financial Development And Environmental Quality In Belt And Road Initiative Countries: Does Institutional Quality Matter?

Abstract

This research aims to test the impact of Remittances on Financial Development and Environmental Quality in 123 Belt and Road Initiative Countries from 2012 to 2021 by using S-GMM. Specifically, the authors found evidence of a positive impact between Remittances and Financial Development and that Remittances increase Environmental Quality by reducing CO2 Emissions. Furthermore, the authors introduce an additional moderating variable, Institutional Quality. The results indicate that countries may benefit when combined with Remittances, leading to their financial development. However, this also results in a significant increase in CO2 Emissions. The authors also employ two measures for Financial Development (FIN) and Environmental Quality (EQ), respectively Financial Development Index (FD) by IMF and Greenhouse Gas (GAS) for robustness checks. While high-income countries face barriers stemming from environmental regulation that need to be addressed, middle-income countries encounter hurdles in establishing good institutional frameworks, and low-income countries need to strive for even stronger financial economies to aid in the development of their national finances and provide income and stability to citizens. The consistent results between the two measures indicate the robustness of the research findings. Finally, this research provides some policy implications for Belt and Road Initiative countries in general and Vietnam in particular to help ensure sustainable economic development while protecting the environment.