Does globalization and financial sector development affect environmental quality? A panel data investigation for the Middle East and North African countries

The broad purpose of this study is to empirically explore the impact of globalization and financial development on environmental pollution by carbon (CO2) emissions in the six Middle East and North Africa (MENA) countries using balanced panel data from 1971 to 2015. We also aimed to test the legitimacy of the environmental Kuznets curve (EKC) hypothesis for this region. The fixed-effects approach preferred by the Hausman specification test is used to estimate the empirical model, and the feasible generalized least squares (F.G.L.S.) estimator is employed to cope with any issue of heteroscedasticity and serial correlation. This study found that globalization and financial development have adverse and significant effects on environmental degradation and affirm the legitimacy of the EKC hypothesis for these countries. The finding of this study suggests that the governments of MENA countries should design and implement appropriate policies for strengthening the renewable sources of energy like wind, solar, bio-fuel, and thermal to decrease CO2 emissions and boost sustainable economic development. The policymakers should focus on the efficiency of institutions and enhancement of energy-saving projects in this region.