Unpacking The Financial Development, Financial Technology and Institutional Quality Nexus in Curbing Climate Change among Middle-Income Countries

Abstract

This study examines the influence of financial development, financial technology and institutional quality on climate change in middle-income economies from 2000 to 2023. The study aims to identify the role of these factors in driving or mitigating CO2 emissions and provide policy recommendations for sustainable economic development. This study employs the method of moment quantile regression (MMQR) approach to unpack the linkage between financial development, financial technology, and institutional quality and CO2 emission across various quantiles. This approach enables a thorough evaluation of the impact of these factors on climate change across different quantiles. The outcomes illustrate the rise in CO2 emission because of financial development, urbanization and economic advancement across all quantiles. The impact of financial technology displayed mixed trends across all quantiles, minimizing emissions at a lower quantile but lowering the effect at higher quantiles Conversely, the institutional quality diminishes CO2 emission at all quantiles, denoting the role of governance in middle-income economies. These outcomes urge policymakers to approve extensive strategies that restrict the negative impacts of financial development, urbanization and economic growth while promoting institutional quality in all middle-income economies. This study is novel in exploring the drivers associated with climate change while concentrating on the financial sector and institutional quality. Besides, it also offers actionable, innovative policy recommendations to address contemporary environmental and economic challenges in middle-income economies.