The nexus of financial development, technological innovation, institutional quality, and environmental quality: evidence from OECD economies

The present study investigates the effect of institution quality, technological innovation, and financial development on environment quality using 37 OECD nations from 1998 to 2018. The cross-sectional dependence (CD) and Lagrange multiplier (LM) techniques are used to measure the cross-sectional dependence. The second-generation panel unit root tests and panel cointegration tests are applied to examine the unit-root properties and long-run association existence between variables. Finally, we employed the two-step (SYS-GMM) methodology to estimate the coefficient values. The findings showed that financial development has a positive effect on selected carbon (CO2) emission dimensions. When the moderating term is introduced, it was identified that institutional quality and technology innovation conditioning effects are crucial between financial development and CO2 emission. Our evidence-based study provides significant results for technology innovation and institutional quality moderating role in reducing CO2 emissions in OECD economies. Our findings are also robust to alternative measures, which could be useful for policymakers to formulate long-term and short-term strategies and policies for a better sustainable environment.