financial development and energy consumption evidence from a heterogeneous panel of asian countries abstract this paper examined relationships between financial development and energy consumption in asia for the period of 1980 2012 for the purpose of the empirical analysis it performed the heterogeneous panel causality test suggested by dumitrescu and hurlin 1 the findings of the panel cointegration test indicated that there was a long run equilibrium relationship between finance and energy consumption in the region moreover the heterogeneous panel causality test detected a unidirectional causality from energy consumption to financial development but not vice versa these results indicate that an expansion of energy usage could be a driving force behind financial development in asia

country risk and capital flow reversals abstract a financial crisis with a capital flow reversal occurs when a country shifts abruptly from a good equilibrium with a low country specific risk premium to a bad equilibrium with a high country specific risk premium and no foreign credit

imperfect competition multiple equilibria and unemployment policy this paper takes a simple imperfectly competitive macro model with increasing returns and shows how it can lead to nonexistence or multiplicity of equilibria the consequences for government policy toward unemployment are explored and shown to be very different from the traditional model it is argued that a multiple equilibrium model is an attractive possible explanation of the behavior of u k unemployment in the 1980s copyright 1990 by royal economic society

theoretical approaches to monetary disinflation abstract during the 1980s many countries adopted tight monetary policies to reduce high inflation rates which were the legacy of the 1970s as inflation threatens to rise at the beginning of this decade this paper provides a survey of the 1980s literature which sought to provide theoretical understandings of how monetary disinflation is achieved four models are presented monetarist neo keynesian new classical and post keynesian each model s explanation of the recession which accompanies the monetary disinflation is outlined as well as possible policy measures to reduce the extent of the recession and to hasten the return to full employment

capital controls capital flow contractions and macroeconomic vulnerability abstract in this paper i analyze whether restrictions to capital mobility reduce vulnerability to external shocks more specifically i ask if countries that restrict the free flow of international capital have a lower probability of experiencing a large contraction in net capital flows i use three new indexes on the degree of international financial integration and a large multi country data set for 1970 2004 to estimate a series of random effect probit equations i find that the marginal effect of higher capital mobility on the probability of a capital flow contraction is positive and statistically significant but very small having a flexible exchange rate greatly reduces the probability of experiencing a capital flow contraction the benefits of flexible rates increase as the degree of capital mobility increases a higher current account deficit increases the probability of a capital flow contraction while a higher ratio of fdi to gdp reduces that probability

lending booms latin america and the world recent theories of crisis put lending booms at the root of financial collapses yet lending booms may be a natural consequence of economic development and fluctuations so are lending booms dangerous in this paper we investigate empirically this question using a broad sample of lending boom episodes over 40 years with a special eye for latin america our results indicate that 1 lending booms are often associated with i a domestic investment boom ii an increase in domestic interest rates iii a worsening of the current account iv a declines in reserves v a real appreciation vi a decline in output growth 2 typical lending booms do not increase substantially the vulnerability of the banking sector or the balance of payments comparing latin america and the rest of the world we find that latin america lending booms make the economy considerably more volatile and vulnerable to financial and balance of payment crisis

on the nexus of financial development economic growth and energy consumption in china new perspective from a gmm panel var approach abstract this paper studies the endogenous relationships among financial development energy consumption and economic growth in china by applying a gmm panel var approach with a panel data of 30 chinese provinces over the period 1996q1 2015q4 financial development is measured by six individual indicators and by a comprehensive indicator obtained through the pca method we also account for regional heterogeneity by dividing our sample into three regions eastern region central region and western region we underline our findings in three aspects first financial development measured by most individual indicators m2 credit revenue of the insurance industry and stock market value and the comprehensive one has a significantly negative impact on economic growth second energy consumption can significantly contribute to economic growth in all regions while no feedback effect is found except in the western region this result is further supported by the granger causality tests last financial development in the sense of m2 credit stock turnover and the comprehensive indicator can significantly lessen energy consumption in all regions but this inhibitory effect is found to be largest in the western region followed by the eastern region and be smallest in the central region the granger causality tests confirm further the existence of heterogeneity across regions a bidirectional granger causality between the two variables is found in the eastern region a unidirectional granger causality running from energy consumption to financial development is identified in the central region and no significant causal relationship shows up in the western region our findings provide valuable policy implications for china heading for a green economic growth

a dual liquidity model for emerging markets the last few years have seen a significant re evaluation of the models used to analyze crises in emerging markets recent models typically stress financial constraints or distorted financial incentives while this certainly represents progress these models share a weakness with the earlier work neither is uniquely about emerging markets adaptations of the mundell fleming model represent argentina as a belgium with larger external shocks likewise emerging market models of financial constraints are adaptations of developed economy ones with tighter financial constraints in our work we have advocated a model which distinguishes between the financial constraints affecting borrowing and lending among agents within an emerging economy and those affecting borrowing from foreign lenders this dual liquidity model offers a parsimonious description of the behavior of firms governments and asset prices during financial crises it also provides prescriptions for optimal policy responses to these crises

remittances financial development and growth abstract despite the increasing importance of remittances in total international capital flows the relationship between remittances and growth has not been adequately studied this paper studies one of the links between remittances and growth in particular how local financial sector development influences a country s capacity to take advantage of remittances using a newly constructed dataset for remittances covering about 100 developing countries we find that remittances boost growth in countries with less developed financial systems by providing an alternative way to finance investment and helping overcome liquidity constraints this finding controls for the endogeneity of remittances and financial development does not depend on the particular measure of financial sector development used and is robust to a number of robustness tests including threshold estimation we also provide evidence that there could be an investment channel trough which remittances can promote growth especially when the financial sector does not meet the credit needs of the population

uncertainty and monetary policy in a wage bargaining model in a wage bargaining model increased uncertainty concerning monetary and real aggregates is shown to give rise to a higher equilibrium unemployment rate moreover the equilibrium unemployment rate is found to depend on the choice of monetary policy regime as this choice affects the uncertainty wage setters face when setting the nominal wage rate it is also shown that the equilibrium inflation rate may depend on uncertainty in such a way that increased uncertainty gives rise to a higher equilibrium unemployment rate as well as a higher equilibrium inflation rate or what has been called stagflation

impact of financial development on trade embodied carbon dioxide emissions evidence from 30 provinces in china abstract the literature on financial development and carbon dioxide co2 emissions is extensive however previous studies have not found the impact of financial development on trade embodied co2 emissions therefore we build a dynamic panel model based on the extension of the stirpat model to verify the overall and indirect impact of financial development we calculate trade embodied co2 emissions of 30 provinces in china in 2000 2014 using the single region input output model srio by eliminating the impact of imported intermediate products on co2 emissions embodied in exports exc in order to measure financial development in china more comprehensively we use financial scale development financial efficiency and financialization to define it results show that the environmental kuznets curve is confirmed at the level of china s provinces in most provinces exc began to increase in 2006 and decline in 2010 but co2 embodied in net exports ec began to decrease in 2005 and increase in 2010 the results of overall impact indicate that different financial development indicators have different effects on ec but they all reduce exc the results of indirect impact through imitation innovation ic and independent research and development rd find that financial scale development increases exc however financial efficiency and financialization decreases exc financial scale development and financial efficiency can decrease ec but financialization increases ec the results of indirect impact through fdi show that financial scale development and financial efficiency can decrease exc and ec financialization decreases exc but the impact of financialization on ec has obvious threshold characteristics when the level of financialization is lower than the threshold value financialization will reduce ec there is regional heterogeneity in the impact of financial development on trade embodied co2 emissions the conclusions of this paper are of great reference value for improving the level of financial development so as to realize the development of china s green trade

cheap labor meets costly capital the impact of devaluations on commodity firms abstract this paper examines how devaluations affect the relative costs of labor and capital and therefore influence production profitability investment and stock returns for firms in the crisis country as well as competitors in the rest of the world after developing these ideas in a small open economy model the paper performs a series of empirical tests using information for about 1100 firms in 10 commodity industries between 1996 and 2000 the empirical tests support the model s main predictions 1 immediately after devaluations commodity firms in the crisis country have output growth rates about 10 20 higher than competitors in other countries 2 immediately after devaluations commodity firms in the crisis country have operating profit growth rates about 15 25 higher than competitors in other countries 3 the effect of devaluations on fixed capital investment and stock returns and therefore expected long run output and profits is determined by capital labor ratios and changes in the cost of capital for example crisis country firms have higher rates of capital growth and better stock performance after devaluations if they had lower capital labor ratios and there was no substantial increase in their interest rates

employment entrepreneurship and 1992 microeconomic policy and european problems this essay has covered several areas which are not usually regarded as closely interrelated policy conclusions have been discussed briefly at various points and will now be developed more fully in this final section as evidence for the interrelatedness of such disparate fields as corporate finance and employment policy we start from the observation that many large firms are relatively inefficient particularly at product innovation and flexible organization and employment policies in part because top managerial compensation depends mainly on size this creates an incentive for excessive growth and empire building rather than payment to shareholders of the free cash flow which cannot be profitably invested internally more appropriate incentives for top management would increase dividend payments and hence the flow of funds into the capital market available for financing new start ups and small firms as venture capital even in the u s the cost of obtaining external capital often constrains small firms to invest only their internal cash flow fazzari et al 1988

investment and the exchange rate an analysis with firm level panel data abstract this paper investigates the relationship between exchange rate fluctuations and the investment decisions of a sample of italian manufacturing firms the results support the view that a depreciation of the exchange rate has a positive effect on investment through the revenue channel and a negative effect through the cost channel the magnitude of these effects varies over time with changes in the firm s external orientation as measured by the share of foreign sales over total sales and the reliance on imported inputs consistent with the predictions of our theoretical framework the effect of exchange rate fluctuations on investment is stronger for firms with low monopoly power facing a high degree of import penetration in the domestic market and of a small size we also provide evidence that the degree of substitutability between domestically produced and imported inputs influences the effect through the expenditure side

sudden stops and the mexican wave currency crises capital flow reversals and output loss in emerging markets sudden stops are the simultaneous occurrence of a currency balance of payments crisis with a reversal in capital flows we investigate whether sudden stop crises are a unique phenomenon and whether they entail an especially large and abrupt pattern of output collapse a bmexican waveq using a panel data set over 1975 1997 and covering 24 emerging market economies we distinguish between the output effects of currency crises capital inflow reversals and sudden stop crises sudden stop crises have a large negative but short lived impact on output growth over and above that found with currency crises a currency crisis typically reduces output by about 2 3 while a sudden stop reduces output by an additional 6 8 in the year of the crisis the cumulative output loss of a sudden stop is even larger around 13 15 over a 3 year period our model estimates correspond closely to the output dynamics of the dmexican wavet such as seen in mexico in 1995 turkey in 1994 and elsewhere and out of sample predictions of the model explain well the sudden and seemingly unexpected collapse in output associated with the 1997 1998 asian crisis d 2005 elsevier b v all rights reserved

the impacts of gdp trade structure exchange rate and fdi inflows on china s carbon emissions abstract this paper examines the impacts of gdp trade structure exchange rate and fdi foreign direct investment inflows on china s carbon emissions from 1982 to 2016 and verifies the validity of ekc environmental kuznets curve hypothesis for china differentiated from the existing literature which rarely considers services trade and exchange rate this paper uses the proportion of services trade to measure trade structure and exchange rate as one of the independent variables firstly the stability of each variable is tested by adf augmented dickey fuller and np ng perron test then ardl bound test is used to test the cointegration of the variables as it has better properties than traditional cointegration methods and is more suitable for the model in this paper thirdly error correction model is used to analyze the long term and short term dynamic relationship between the variables fourthly the granger causality test based on the var is performed it is found that during the study period ekc hypothesis was valid for china and that whilst the impacts of both services trade and exchange rate on china s carbon emissions were negative the impacts of fdi inflows were positive conclusions and policy implications are provided at the end of the paper

the modern view of macroeconomics some critical reflections david romer has proposed a new basic macroeconomic framework the is mp ia model its proponents claim that it represents the modern view of macroeconomics we show that the new framework remains closely attached to the neoclassical synthesis and in addition does not take account of i the empirical evidence on the output inflation trade off ii the evidence on the interdependence of aggregate demand and supply iii the institutional limits of monetary policy and iv the implications for macroeconomic policy of i ii and iii once these aspects have been incorporated short run stabilisation policy is not neutral in the long run the notion of a natural rate of interest becomes untenable and aggregate demand turns into the crucial exogenous variable copyright 2005 oxford university press

unions power collective bargaining and optimal monetary policy we study ramsey policies and optimal monetary policy rules in a model with sticky prices and unionized labour markets collective wage bargaining and unions monopoly power dampen wage uctuations and amplify employment uctuations relatively to a dnk model the optimal

challenges facing natural rate theory abstract this paper attempts to test the natural rate hypothesis by looking at historical unemployment data for france the uk and the us we find that the unemployment series can be described as stationary around an infrequently changing mean moreover that the speed of convergence towards mean unemployment is slower when unemployment is high and differs across the three countries the two european countries having more persistence we do not find any evidence that the persistence of a change in unemployment is a function of the size of the change we conclude that the data are consistent with multiple equilibria models where large shocks bring the economy from one equilibrium to another and also with models with a moving natural rate

does financial agglomeration promote the increase of energy efficiency in china abstract whether financial agglomeration is conducive to the improvement of energy efficiency is of great significance for china to better follow the path of energy conservation and emission reduction and green sustainable development based on the balanced panel data of 285 cities in china from 2005 to 2017 this paper analyzes the impact of financial agglomeration on energy efficiency theoretical analysis shows that financial agglomeration can influence energy efficiency through scale economy effect innovation driving effect information spillover effect and structural adjustment effect dynamic spatial econometric results show that from a national perspective financial agglomeration has a positive impact on energy efficiency however from the perspective of different regions and different city sizes it is found that financial agglomeration can have different effects on energy efficiency financial agglomeration has a significant positive impact on energy efficiency in eastern and central regions megacities and big cities financial agglomeration has a significant negative impact on energy efficiency in western china and has no significant effect on energy efficiency in medium sized and small cities finally based on the conclusions of the study specific proposals for financial agglomeration to improve energy efficiency are proposed

sudden stops banking crises and investment collapses in emerging markets abstract we evaluate whether financial openness leaves emerging market economies vulnerable to the adverse effects of capital reversals sudden stops on domestic investment we investigate this claim in a broad sample of emerging markets during the period 1976 2002 if the banking sector does not experience a systemic crisis sudden stop events fail to have a significant impact on investment bank crises on the other hand have a significant negative effect on investment even in the absence of a contemporaneous sudden stop crisis we also find that openness to capital flows worsens the adverse impact of banking crises on investment our results provide statistical support for the policy view that a strong banking sector which can withstand the negative fallout of capital flight is essential for countries that open their economies to international financial flows

an evaluation of the inflationary pressure associated with short and long term unemployment abstract the role of long term unemployment in inflationary pressures has been examined in academic studies and discussed by policymakers i demonstrate econometric weaknesses in previous studies propose a solution based on regional variation and present new evidence

does fdi influence renewable energy consumption an analysis of sectoral fdi impact on renewable and non renewable industrial energy consumption this study examines the link between foreign direct investment fdi and energy demand fdi is a source of financing that allows businesses to grow at the same time fdi can be a source of innovation that promotes energy efficiency existing evidence on the impact of aggregate fdi inflows on energy consumption is scarce and inconclusive in the current study we disaggregate fdi inflows into mining manufacturing total services and financial services components and examine the impact of these fdi flows on renewable and non renewable industrial energy sources for 74 countries for the period 1985 2012 we employ a blundell bond dynamic panel estimator to control for endogeneity and omitted variable biases in our panels the results point broadly to an energy consumption reducing effect with respect to non renewable sources of energy and an energy consumption augmenting effects with respect to renewable energy we find that these effects vary in magnitude and significance by sectoral fdi

do economic financial and institutional developments matter for environmental degradation evidence from transitional economies abstract several studies have examined the relationship between environmental degradation and economic growth however most of them did not take into account financial developments and institutional quality moreover stern stern d 2004 the rise and fall of the environmental kuznets curve world development 32 8 1419 1439 noted that there are important econometric weaknesses in the earlier studies such as endogeneity heteroscedasticity omitted variables etc the purpose of this paper is to fill this gap in the literature by investigating the linkage between not only economic development and environmental quality but also financial development and institutional quality we employ the standard reduced form modelling approach to control for country specific unobserved heterogeneity and gmm estimation to control for endogeneity our study considers 24 transition economies and panel data for 1993 2004 our results support the ekc hypothesis while confirming the importance of both institutional quality and financial development for environmental performance we also found that financial liberalization may be harmful for environmental quality if it is not accomplished in a strong institutional framework

asymmetric nominal flexibility and economic fluctuations recent research has produced strong evidence that supports the asymmetric effects of positive and negative money supply shocks using quarterly data for the united states the evidence of cover 10 suggests that positive money supply shocks do not have an effect on output while negative money supply shocks do the asymmetric impact of demand shocks on real output growth is not addressed in the context of mainstream business cycle theories which include the equilibrium explanation pioneered by lucas 21 and neo keynesian models emphasizing nominal wage rigidity 14 15 or price rigidity 2 in the context of lucas s paradigm agents are scattered in informationaly isolated islands across the economy an unexpected positive or negative change in aggregate demand may be misperceived by agents as being specific to their markets in the case of a positive demand shock producers and workers expand the output and labor supplied to take advantage of the perceived increased demand in their island similarly agents are expected to contract the output produced in response to a perceived reduction in the demand for their output this scenario does not provide an obvious theoretical channel through which the slope of the short run supply curve can be differentiated depending on the direction of the change in aggregate demand in the context of a contractual wage rigidity framework the nominal wage is fixed for a duration that is determined by contractual agreements according to this framework a change in aggregate demand deviates the real wage from its market clearing value for a duration that is determined by the contract length a positive demand shock will raise the price level decrease the real wage and in turn cause an expansion in labor demand and the output produced in the short run a negative demand shock in contrast raises the realized real wage which has a negative impact on labor demand and the output produced in the short run in the absence of any stipulation in contracts that differentiates the degree of wage rigidity in response to a positive and negative demand shock the slope of the short run supply curve is not likely to be differentiated based on the direction of change in aggregate demand in the context of the sticky price explanation of business cycles the price level across sectors of the economy is fixed for a specific duration a change positive or negative in aggregate demand will be absorbed in output as long as the price level remains fixed in the short run in the absence of any stipulation that differentiates the upward and downward stickiness of the price

the effects of electricity consumption economic growth financial development and foreign direct investment on co2 emissions in kuwait abstract this study examined the empirical effects of economic growth electricity consumption foreign direct investment fdi and financial development on carbon dioxide co2 emissions in kuwait using time series data for the period 1980 2013 to achieve this goal we applied the autoregressive distributed lag ardl bounds testing approach and found that cointegration exists among the series findings indicate that economic growth electricity consumption and fdi stimulate co2 emissions in both the short and long run the vecm granger causality analysis revealed that fdi economic growth and electricity consumption strongly granger cause co2 emissions based on these findings the study recommends that kuwait reduce emissions by expanding its existing carbon capture utilization and storage plants capitalizing on its vast solar and wind energy reducing high subsidies of the residential electricity scheme and aggressively investing in energy research to build expertise for achieving electricity generation efficiency

causality cointegration and control abstract the first sections of the paper show that causality tests can be relevant when considering the effectiveness of a control mechanism rejecting some results in earlier papers the relevance comes from a more careful consideration of what information is available to whom and when compared to previous work the final section of the paper extends this analysis to cointegrated variables when causality is a necessary consequence

energy consumption as a condition for per capita carbon dioxide emission growth the results of a qualitative comparative analysis in the european union abstract the problematic of climatic changes and the respective consequences raises the need to discuss the problem and define measures to control and or reverse them because one of the causes of climatic changes is the emission of greenhouse gases the european union defined the reduction of emissions as a main concern as well as increasing efficiency in the energy sector with the objective of analysing the main conditions affecting the growth of per capita emissions this paper uses a fuzzy set qualitative comparative analysis fsqca based on a sample of data from 2010 to 2014 the conditions evaluated were i gdp growth ii change in the share of gdp relating to private consumption iii change in the share of gdp relating to public consumption iv change in the share of gdp on investment v and energy consumption growth the main drivers contributing to reduced emissions were the crisis and energy consumption evaluation of the main factors affecting emissions growth is the main contribution of this study considering that economic growth is an obvious goal the european union must design measures encouraging investment in more efficient and less pollutant technologies which is also in accordance with oecd sustainability goals

inflation debt and indexation these twelve essays cover topics on the frontier of indexation and practice an often proposed and debated tool of economic policy they range from highly theoretical discussions to practical experiences in brazil and europe rudiger dombush is ford international professor of economics at mit mario henrique simonsen is director of the postgraduate school of economics getulio vargas foundation rio de janeiro and former minister of finance and planning brazil

small system modelling of real wages inflation unemployment and output per capita in italy 1970 1994 the relationships between real wages output per capita inflation and unemployment in italy between 1970 and 1994 are modelled using a cointegrated vector autoregression there is evidence of a change in the underlying equilibria and in the dynamic evolution of the variables probably associated with the substantial changes in many sectors of the italian economy after 1979 alternative ways to model structural change in the italian labour market are considered in adopting a split sample approach the results favour an hysteresis interpretation of unemployment

how bad are twins output costs of currency and banking crises we investigate the output effects of banking and currency crises in emerging markets focusing on whether twin crises entail especially large losses recent literature emphasizes the costs of financial crises and suggests that twin crises are particularly damaging to the real economy using a panel data set for 1975 97 we find that currency banking crises are very costly reducing output by about 5 8 8 10 over a 2 4 year period the cumulative loss of both types of crises is therefore very large we do not find however additional feedbacks or interactive effects associated with twin crises further damaging the economy

central banks partisan politics and macroeconomic outcomes what are the implications of the trend toward granting central bank independence for partisan theories of the macroeconomy the conventional view is that parties of the left and right strive to achieve distinctive macroeconomic outcomes when in government however when faced with an independent central bank parties of the left may prove unable to produce their preferred partisan outcomes whereas right parties may be privileged in their ability to pursue their goals moreover granting the central bank independence can be expected to have differing effects depending on whether left or right parties prevail in government these issues are explored with a pooled time series model of inflation and unemployment in 16 organization for economic co operation and development countries from 1961 through 1991 the results support the claim that the effects of partisan government and central bank organization are mutually contingent the pattern of results anticipated by partisan theory only arises where central b

currency crises and monetary policy in an economy with credit constraints this paper presents a simple model of currency crises which is driven by the interplay between the credit constraints of private domestic firms and the existence of nominal price rigidities the possibility of multiple equilibria including a currency crisis equilibrium with low output and a depreciated domestic currency results from the following mechanism if nominal prices are sticky a currency depreciation leads to an increase in the foreign currency debt repayment obligations of firms and thus to a fall in their profits this reduces firms borrowing capacity and therefore investment and output in a credit constrained economy which in turn reduces the demand for the domestic currency and leads to a depreciation we examine the impact of various shocks including productivity fiscal or expectational shocks we then analyze the optimal monetary policy to prevent or solve currency crises we also argue that currency crises can occur both under fixed and flexible exchange rate regimes as the primary source of crises is the deteriorating balance sheet of private firms

egalitarian wage policies and long term unemployment how does a centrally imposed egalitarian wage policy affect unemployment when workers differ with respect to productivity the effect on total unemployment is found to be ambiguous egalitarian wages encourage job creation because increased profits derived from the most productive workers more than outweigh reduced profits derived from the least productive workers short term unemployment is reduced on the other hand firms respond by raising their reservation productivity some workers are left almost completely unemployable long term unemployment rises less inequality in the wage distribution is obtained at the expense of more inequality in the distribution of unemployment

foreign direct investment and decoupling between energy and gross domestic product in developing countries on a sample of 20 developing countries we noticed a clear decline in the energy intensity as foreign direct investment increases the reason for that probably is the use of modern technologies that came with foreign direct investment i e a leapfrogging over the old fashioned traditional technologies in use in these countries

the asymmetric effects of demand shocks international evidence on determinants and implications the analysis focuses on the asymmetric effects of demand shocks the evidence across a sample of 19 industrial countries differentiates the effects of expansionary and contractionary aggregate demand shocks on real output growth and nominal wage and price inflation the difference appears consistent with a kinked supply curve that is dependent on the asymmetric flexibility of wages and or prices across countries furthermore the evidence does not support the endogeneity of asymmetric nominal flexibility with respect to demand variability or trend price inflation across countries on average across countries demand variability increases nominal wage and price inflation relative to deflation while exacerbating output contraction relative to expansion the apparent trade off between changes in real and nominal trends provides further support to the supply side explanation of asymmetry

unions in a frictional labor market abstract a labor market with search and matching frictions where wage setting is controlled by a monopoly union that follows a norm of wage solidarity is found vulnerable to substantial distortions associated with holdup with full commitment to future wages the union achieves efficient hiring in the long run but hikes up wages in the short run to appropriate rents from firms without commitment in a markov perfect equilibrium hiring is too low both in the short and the long run the quantitative impact is demonstrated in an extended model with partial union coverage and multiperiod union contracting

modelling real exchange rate effects on output performance in latin america this article empirically analyses real per capita gdp growth for six latin american countries argentina brazil chile columbia mexico venezuela in terms of real exchange rate depreciations inflation and us interest rates focussing on the role of the real exchange rate we find evidence of nonlinearity in this relationship which we capture through a smooth transition regression model with the exception of mexico nonlinearity in economic growth is associated with changes in the real exchange rate with depreciations leading to different relationships compared with appreciations regimes for mexico are associated with the past growth rates with effectively symmetric effects of real exchange rate changes although our results are in accord with other recent literature in that depreciations may have negative effects for growth the asymmetries we uncover indicate that these effects depend on the conditioning state

does openness to trade make countries more vulnerable to sudden stops or less using gravity to establish causality openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows several authors have offered empirical evidence that having a large tradable sector reduces the contraction necessary to adjust to a given cut off in funding such studies may however be subject to the problem that trade is endogenous we use the gravity instrument for trade openness which is constructed from geographical determinants of bilateral trade we find that openness indeed makes countries less vulnerable to crises and that the relationship is even stronger when correcting for the endogeneity of trade

environmental kuznets curve and financial development in pakistan abstract in this study we analyzed the effects of financial development per capita real income the square of per capita real income per capita energy consumption and openness on per capita co 2 emissions for pakistan during 1972 2013 the bound f test for cointegration yielded evidence of a long term relationship among these variables the results confirm the existence of an environmental kuznets curve in pakistan for both the short and long term this finding indicates that at the initial stage of development the level of co 2 increases with income and after some threshold level of income this relationship may change from positive to negative as more efficient infrastructure and energy efficient technology are implemented during the development process of the country the findings of this study also reveal a significantly positive sign for the coefficient of financial development suggesting that financial development has occurred at the expense of environmental quality the results further indicate that the key contributing factors to carbon emissions in pakistan are income energy consumption and financial development in addition the openness variable has no significant influence on carbon emission in either the short or long term

structural unemployment cyclical unemployment and income inequality this is the first study that decomposes unemployment into its structural and cyclical components and investigates their impact on income distribution controlling for the influence of inflation increases in structural unemployment have a substantial aggravating impact on income inequality inflation has a progressive impact which is due to the unexpected component the study demonstrates that previous work failed to take into account the stochastic trend behavior of the variables consequently specifications used by previous research cannot predict the behavior of income shares after 1983 whereas the specification used by this paper generates accurate forecasts the results also indicate that a sustained gnp growth is not necessarily associated with an improvement in income inequality because sustained gnp growth can coexist with increased structural unemployment

unemployment persistence does the size of the shock matter one of the stylized facts of unemployment is that shifts in its mean rate between decades and half decades account for most of its variance in this paper we use a statistical analysis based on markov switching regression models to identify the dates of infrequent changes in the mean of the unemployment rate series of fifteen countries we find that in most countries unemployment persistence is much reduced once the infrequently changing mean rate induced by large shocks to unemployment has been removed we conclude that the observed persistence in unemployment appears to be consistent with multiple equilibria models and models with an endogeneous natural rate 1998 john wiley sons ltd

the impact of energy consumption and co2 emission on the economic and financial development in 19 selected countries abstract this study investigated the impact of energy consumption on the economic and financial development in 19 countries these countries were selected due to the fact that the financial development indicators contribute an important share to their total gdp the panel model was employed taking the period of 1980 to 2008 the results show that energy consumption enables these countries to achieve high economic and financial development however the high development that these countries have achieved in the late three decades increased the co 2 emission it is important that these countries should reduce the level of pollution through utilizing energy protection policies such as rationing energy consumption and controlling carbon dioxide emissions or increasing the share of clean energy of their total energy consumption

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

sudden stops and financial frictions evidence from industry level data the nature of the microeconomic frictions that transform sudden stops in output collapses is not only of academic interest but also crucial for the correct design of policy responses to prevent and address these episodes and the lack of evidence on this regard is an important shortcoming this paper uses industry level data in a sample of 45 developed and emerging countries and a differences in differences methodology to provide evidence of the role of financial frictions for the consequences of sudden stops the results show that consistently with financial frictions being important industries that are more dependent on external finance decline significantly more during a sudden stop especially in less financially developed countries the results are robust to controlling for other possible mechanisms including labor market frictions the paper also provides results on the role of comparative advantage during sudden stops and on the usefulness of various policy responses to attenuate the consequences of these shocks

a corporate balance sheet approach to currency crises this paper presents a general equilibrium currency crisis model of the third generation in which the possibility of currency crises is driven by the interplay between private firms credit constraints and nominal price rigidities despite our emphasis on microfoundations the model remains sufficiently simple that the policy analysis can be conducted graphically the analysis hinges on four main features i ex post deviations from purchasing power parity ii credit constraints a la bernanke gertler iii foreign currency borrowing by domestic firms iv a competitive banking sector lending to firms and holding reserves and a monetary policy conducted either through open market operations or short term lending facilities we derive sufficient conditions for the existence of a sunspot equilibrium with currency crises we show that an interest rate increase intended to support the currency in a crisis may not be effective but that a relaxation of short term lending facilities can make this policy effective by attenuating the rise in interest rates relevant to firms

environmental degradation in france the effects of fdi financial development and energy innovations abstract this paper explores the determinants of carbon emissions in france by accounting for the significant role played by foreign direct investment fdi financial development economic growth energy consumption and energy research innovations in influencing co 2 emissions function in this endeavour we employ the novel sor shahbaz et al 2017 unit root test on french time series data over the period 1955 2016 to examine the order of integration in the presence of sharp and smooth structural breaks in the variables we also apply the bootstrapping bounds testing approach recently developed by mcnown et al 2018 to investigate the presence of cointegration and the empirical findings underscore the presence of cointegration among the time series moreover we find that fdi has a positive impact while energy research innovations have a negative impact on french carbon emissions financial development lowers carbon emissions thereby improving the french environmental quality fdi degrades the environment and thus supports the pollution haven hypothesis in france similarly financial development suggests that financial stability is a required condition for improving environmental quality so are energy research innovations contrarily energy consumption is positively linked with carbon emissions however the relationship between economic growth and co 2 emissions is an inverted u which is a validation of the environmental kuznets curve ekc

the impact of financial development on energy consumption in emerging economies abstract financial development is often cited as a very important driver of economic growth in emerging economies and it is thus likely that financial development affects energy demand this study uses generalized method of moments estimation techniques to examine the impact of financial development on energy consumption in a sample of emerging countries several different measures of financial development are examined using a panel data set on 22 emerging countries covering the period 1990 2006 the empirical results show a positive and statistically significant relationship between financial development and energy consumption when financial development is measured using stock market variables like stock market capitalization to gdp stock market value traded to gdp and stock market turnover the implications of these results for energy policy are discussed

the effect of foreign direct investment and stock market growth on clean energy use across a panel of emerging market economies this study investigates the impact of both fdi inflows and stock market developments on clean energy use across 20 emerging market economies spanning the period 1991 2012 it accounts for cross sectional dependence and heterogeneity in the analysis and employs robust panel econometric techniques the empirical results on long run elasticities display that economic output fdi inflows and stock market developments have all a significant positive impact on clean energy consumption finally the results on heterogeneous panel non causality tests indicate the presence of unidirectional causality running from fdi to clean energy consumption in the short run for robustness purposes the paper also estimates long run elasticities for individual countries with the findings documenting that both fdi inflows and stock market developments have a considerable positive impact on clean energy uses the findings urge that both policy makers and governments in these emerging market economies should initiate effective public private partnership investments in clean energy projects by providing lucrative incentives which in turn will encourage both domestic and foreign investors to invest more in clean energy projects and eventually moving these economies towards sustainable economic growth

sharp reductions in current account deficits an empirical analysis abstract we study determinants and consequences of sharp reductions in current account imbalances reversals in low and middle income countries we pose two questions what triggers reversals and what factors explain how costly reversals are we find that both domestic variables such as the current account balance openness and the level of reserves and external variables such as terms of trade shocks us real interest rates and growth in industrial countries seem to play an important role in explaining reversals in current account imbalances we also find some evidence that countries with a less appreciated real exchange rate higher investment and more openness prior to the reversal tend to grow faster after a reversal occurs

does higher economic and financial development lead to environmental degradation evidence from bric countries abstract a vast number of studies addressed the environmental degradation and economic development but not financial development moreover as argued by stern 2004 the rise and fall of the environmental kuznets curve world development 32 1419 1439 they present important econometric weaknesses using standard reduced form modeling approach and controlling for country specific unobserved heterogeneity we investigate the linkage between not only economic development and environmental quality but also the financial development panel data over period 1992 2004 is used we find that both economic and financial development are determinants of the environmental quality in bric economies we show that higher degree of economic and financial development decreases the environmental degradation our analysis suggests that financial liberalization and openness are essential factors for the co 2 reduction the adoption of policies directed to financial openness and liberalization to attract higher levels of r d related foreign direct investment might reduce the environmental degradation in countries under consideration in addition the robustness check trough the inclusion of us and japan does not alter our main findings

tracing externalities as sources of indeterminacy abstract this paper offers further inquiry into sources of indeterminacy in general equilibrium we take a more agnostic approach than previous work as we allow for a more general interpretation of externalities in particular we identify the origin of scale economies as being from either labor or capital we find that in the one sector model it is primarily the externalities associated with labor that generate the result however in the two sector model indeterminacy can be ultimately traced back to the externalities from capital in the investment sector

the long run and causal analysis of energy growth openness and financial development on carbon emissions in turkey abstract the aim of this paper is to examine the causal relationship between financial development trade economic growth energy consumption and carbon emissions in turkey for the 1960 2007 period the bounds f test for cointegration test yields evidence of a long run relationship between per capita carbon emissions per capita energy consumption per capita real income the square of per capita real income openness and financial development the results show that an increase in foreign trade to gdp ratio results an increase in per capita carbon emissions and financial development variable has no significant effect on per capita carbon emissions in the long run these results also support the validity of ekc hypothesis in the turkish economy it means that the level of co 2 emissions initially increases with income until it reaches its stabilization point then it declines in turkey in addition the paper explores causal relationship between the variables by using error correction based granger causality models

energy consumption pollutant emissions and economic growth in south africa article i nfo article history this paper examines the long run and the causal relationship between economic growth pollutant emissions and energy consumption for south africa for the period 1965 2006 in a multivariate framework which includes labour and capital as additional variables using the bound test approach to cointegration we found a short run as well as a long run relationship among the variables with a positive and a statistically significant relationship between pollutant emissions and economic growth further applying a modified version of the granger causality test we also found a unidirectional causality running from pollutant emissions to economic growth from energy consumption to economic growth and from energy consumption to co2 emissions all without a feedback the econometric evidence suggests that south africa has to sacrifice economic growth or reduce its energy consumption per unit of output or both in order to reduce pollutant emissions in the long run however it is possible to meet the energy needs of the country and at the same time reduce co2 emissions by developing energy alternatives to coal the main source of co2 emissions however the econometric results upon which the policy suggestions are made should be interpreted with care as they may not be sufficiently robust enough to categorically warrant the choice of an unpalatable policy option by south africa

energy consumption carbon emissions and economic growth in china abstract this paper investigates the existence and direction of granger causality between economic growth energy consumption and carbon emissions in china applying a multivariate model of economic growth energy use carbon emissions capital and urban population empirical results for china over the period 1960 2007 suggest a unidirectional granger causality running from gdp to energy consumption and a unidirectional granger causality running from energy consumption to carbon emissions in the long run evidence shows that neither carbon emissions nor energy consumption leads economic growth therefore the government of china can purse conservative energy policy and carbon emissions reduction policy in the long run without impeding economic growth

multiple equilibria in the british labour market some empirical evidence abstract this paper takes a simple imperfectly competitive aggregate labour market model with increasing returns which can lead to non existence or multiplicity of equilibria the model is estimated using annual aggregate data for britain some evidence is found and recent british economic history is interpreted using the model

ranking unemployment duration and wages it explores the implication of one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time this assumption ranking is contrasted with the assumption of random hiring no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching the joint behaviour of unemployment the distribution of unemployment durations and wages are characterized the implication that the re employment prospects of employed workers were they to become unemployed are better than those of the currently unemployed appears to have been an important feature of european unemployment experience in the 1980 s this paper examines the effects of the composition of unemployment on wage determination it explores one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time we refer to this assumption as ranking and contrast it throughout to the assumption of random hiring or no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching we characterize the joint behaviour of unemployment the distribution of unemployment durations and wages ranking has a number of important implications first in addition to the obvious result that the exit rate from unemployment is a decreasing function of duration we show that the effect of duration is stronger the higher the rate of unemployment second with the wage depending on the distributions of prospective unemployment durations the presence of long term unemployed per se has little effect on wages third looking at the relation between the wage and the aggregate level of unemployment and comparing ranking to the case of no ranking the wage moves less with the level of unemployment but more with the change in unemployment put simply ranking and no ranking models show exactly the same aggregate unemployment slightly different long run responses of wages to unemployment and sharply different wage dynamics the paper is organized as follows section i characterizes the matching process and derives a matching function based on an urn ball process with vacancies as urns and applications by unemployed workers as balls thus the distribution of applications per vacancy depends on aggregate unemployment and vacancies vacancies with at least one acceptable application are filled when a vacancy receives more than one acceptable application firms use a rule to choose among applicants thus the rule determines who is hired but does not affect the number of hires section ii uses this matching function in a model of the labour market with continual job creation and destruction and characterizes the equilibrium values of unemployment vacancies and hires

lending booms sharp reversals and real exchange rate dynamics abstract emerging markets in the 1990s experienced periods of booms followed by collapses in gross domestic product consumption traded and non traded sector output and real exchange rate movements alongside unprecedented movements in foreign investor participation in these economies an important feature of these episodes is the asymmetry in the pattern of booms and collapses we introduce a natural search friction into the foreign investment decision in a small open economy and demonstrate that this can generate the asymmetry observed in the data the magnitude of the reversals predicted by the model can be quantitatively large and empirically relevant

increasing returns and the foundations of unemployment theory current approaches to macroeconomic theory divide roughly into two basic schools of thought one approach typically associated with rational expectations views the economy as basically at or near walrasian market clearing equilibrium in which case it becomes very difficult to explain away convincingly the undeniable persistence at times of involuntary unemployment another approach views the underemployed economy as being in a state of temporary fixed price disequilibrium in which case aside from having to repress suspicions that the essence of effective demand failure might not have to do with prices fixed at wrong values there is a lot of rationalising to be done about why profitable adjustments are so slow this paper argues that something like an internally consistent theory of steady state involuntary unemployment is possible and even plausible the cornerstone of this third approach is increasing returns to scale which blocks unemployed agents from breaking out of a low level equilibrium trap unless there is overall coordination or stimulation a simple model is presented which contains the basic ideas

staggered wages and output dynamics under disinflation we study the output costs of a reduction in monetary growth in a dynamic general equilibrium model with staggered wages the money wage is fixed for two periods and is chosen according to intertemporal optimisation agents have labour market monopoly power we show that the introduction of microfoundations helps to resolve the puzzle raised by directly postulated models namely that disinflation in staggered pricing models causes a boom in our model disinflation whether unanticipated or anticipated unambiguously causes a slump

asymmetry in the effects of monetary and government spending shocks contrasting evidence and implications magda kandil 1 introduction recent research on business cycles has produced evidence that demonstrates the asymmetric effects of monetary shocks on economic variables 1 specifically the effect of expansionary monetary shocks on economic variables may be different from that of contractionary shocks the empirical evidence has stimulated efforts to provide an adequate theoretical explanation to the observed asymmetry sources of asymmetry have varied sharply in the theoretical literature primary explanations may be classified into supply side and demand side sources of asymmetry a strand of the theoretical literature has viewed asymmetry of economic fluctuations to be a supply side phenomenon demand shifts along a kinked supply curve are likely to produce varying effects on the economy as to the explanation of the kinked shape of the supply curve competing models offer explanations in one direction some have explained the asymmetric shape of the supply curve by conditions in the labor market this possibility arises in the context of models that advocate the contractual nominal wage rigidity explanation of business cycles the stipulation of wage contracts may allow for asymmetric wage indexation for example if wages are more responsive to expansionary demand shocks compared to contractionary shocks asymmetric wage indexation is consistent with a kinked supply curve in labor and output markets consequently expansionary demand shocks are likely to move the economy along a steeper supply curve 2 alternatively supply side asymmetry may be attributed to conditions in the p roduct market that differentiate price adjustment in the upward and downward directions faced with menu costs firms may be inclined for more frequent and larger adjustments of prices in the upward compared to the downward direction this possibility also is consistent with a steeper supply curve in the face of positive demand shocks compared to negative shocks 3 another line of the theoretical explanations of asymmetric economic fluctuations has emphasized possible asymmetry on the demand side of the economy conditions in the money and or goods markets may differentiate the response of aggregate demand to positive and negative shocks 4 this possibility differentiates the size of aggregate demand shifts in the face of expansionary and contractionary shocks in the absence of supply side asymmetry demand side asymmetry differentiates the severity of economic fluctuations in the face of positive and negative shocks the primary difference between demand side and supply side explanations concerns the output and inflationary effects in response to asymmetry supply side asymmetry produces a trade off between the asymmetric effects of demand shocks on output and their inflationary effects on wages and or prices the response of output growth is larger in the face of demand contraction compared to expansion concurrently the inflationary effect of demand shifts exceeds the deflationary effect on nominal wage and or price in contrast demand side asymmetry produces a positive correlation between the asymmetric effects of demand shocks on real output growth and nominal wage and price inflation that is larger output contraction relative to expansion correlates with smaller inflation relative to deflation of the nominal wage and price in the face of demand shocks the purpose of this investigation is to contrast asymmetry on the demand and supply sides in the face of two specific demand shocks monetary and government spending shocks demand and or supply conditions may differentiate the expansionary and contractionary effects of monetary and fiscal policies the article s analysis will highlight the specifics of this asymmetry the empirical evidence sheds some light on potential explanations of this asymmetry as follows conditions in the credit market and the behavior of ricardian consumers may differentiate the effects of expansionary and contractionary government spending shocks on aggregate demand

some instability puzzles in kaleckian models of growth and distribution a critical survey we tackle the issue of the possible instability of the kaleckian distribution and growth model distinguishing between keynesian and harrodian instability we review various mechanisms that have been proposed by critics of the kaleckian model to tame harrodian instability while bringing back the rate of utilisation to its normal rate we find that the mechanisms that have been suggested are far from convincing therefore we conclude that it may be premature for the critics of the kaleckian model to dismiss the endogeneity of the rate of capacity utilisation in long run growth equilibrium copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

energy consumption income and carbon emissions in the united states abstract this paper investigates the effect of energy consumption and output on carbon emissions in the united states earlier research focused on testing the existence and or shape of an environmental kuznets curve without taking energy consumption into account we investigate the granger causality relationship between income energy consumption and carbon emissions including labor and gross fixed capital formation in the model we find that income does not granger cause carbon emissions in the us in the long run but energy use does hence income growth by itself may not become a solution to environmental problems

the asymmetric stabilizing effects of price flexibility historical evidence and implications the evidence of business cycles across a sample of industrial countries indicates asymmetry in the output and price adjustments to aggregate demand shocks in the pre and post war periods upward price flexibility is significant in moderating output fluctuations across countries in the pre and post war periods nonetheless the effect of upward price flexibility in accelerating trend price inflation is more evident across countries in the post war period compared to the pre war period the combined evidence is consistent with a steeper supply curve in the face of expansionary demand shocks that increases the stabilizing effect of upward price flexibility in contrast a flatter supply curve in the face of negative demand shocks has countered the stabilizing function of downward price flexibility which appears insignificant across countries in the pre and post war periods in addition a slower demand response to price change during recessions has further reinforced the contractionary effect on output d

fiscal and monetary policies and the cost of sudden stops abstract this article investigates the effects of monetary and fiscal policies on output growth during sudden stop balance of payments crisis in emerging markets and developing countries sudden stops in capital flows and subsequent deep recessions are a frequent occurrence in these countries but there is no professional consensus and little systematic empirical evidence shedding light on the macroeconomic policy mix most likely to limit output losses during these episodes to address this issue we investigate 83 sudden stop crisis in 66 countries using a baseline empirical model to control for the various determinants of output losses during sudden stops we measure the marginal effects of policy on output losses and find strong evidence that monetary tightening rise in the discount rate or unsterilized rise in international reserves and discretionary fiscal contraction are significantly correlated with larger output losses following a sudden stop fiscal expansion is associated with smaller output losses following a sudden stop but monetary expansion has no discernable effect the macroeconomic policy mix associated with the least output loss during a sudden stop financial crisis is a discretionary fiscal expansion combined with a neutral monetary policy

energy consumption economic growth and carbon emissions challenges faced by an eu candidate member abstract this paper investigates the long run granger causality relationship between economic growth carbon dioxide emissions and energy consumption in turkey controlling for gross fixed capital formation and labor the most interesting result is that carbon emissions seem to granger cause energy consumption but the reverse is not true the lack of a long run causal link between income and emissions may be implying that to reduce carbon emissions turkey does not have to forgo economic growth

the impact of foreign direct investment on environmental quality a bounds testing and causality analysis for turkey abstract this study aims to investigate the impact of foreign direct investment fdi together with gross domestic product gdp the square of gdp and energy consumption on carbon dioxide co2 emissions in turkey over the period 1974 2010 we employ both the bounds test approach which has superior properties especially in small samples and the hatemi j test which takes structural breaks into consideration in the co integration analysis due to the co integration relationship between co2 emissions and other variables the autoregressive distributed lag ardl model is used in order to investigate short and long run elasticity between the variables the long run coefficients of the ardl model indicate that the effect of fdi on co2 emissions is positive but relatively small while the effects of the gdp and energy consumption on co2 emissions are quite considerable moreover the short run coefficients obtained by the error correction model ecm are found to be similar to those of the long run model the findings support the validity of the environmental kuznets curve ekc hypothesis in both time horizons the vector ecm based granger causality test is also applied to investigate the causal link the causality test results indicate the existence of a causality running from all explanatory variables to co2 emissions in the long run overall the findings suggest that turkey should promote energy efficiency with sustainable growth and encourage more fdi inflows particularly in technology intensive and environment friendly industries to improve environmental quality

financial development and economic growth views and agenda this critique argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth the body of work would push even most skeptics toward the belief that the development of financial markets and institutions is a critical and inextricable part of the growth process and away from the view that the financial system is an inconsequential sideshow responding passively to economic growth many gaps remain however and the paper highlights areas in acute need of additional research

capital controls and exchange rate instability in developing economies abstract a large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability this paper investigates whether legal restrictions on international capital flows are associated with greater currency stability we employ a comprehensive panel data set of 69 developing economies over the 1975 1997 period identifying 160 currency crises we control for macroeconomic political and institutional characteristics that influence the probability of a currency crisis employ alternative measures of restrictions on international payments and account for possible joint causality between the likelihood of a currency attack and the imposition of capital controls we find evidence that restrictions on capital flows do not effectively insulate economies from currency problems rather countries with less restrictive capital controls and more liberalized regimes appear to be less prone to speculative attacks

the impact of financial development on carbon emissions an empirical analysis in china given the complexity between china s financial development and carbon emissions this paper uses some econometric techniques including cointegration theory granger causality test variance decomposition etc to explore the influence of financial development on carbon emissions results indicate that first china s financial development acts as an important driver for carbon emissions increase which should be taken into account when carbon emissions demand is projected second the influence of financial intermediation scale on carbon emissions outweighs that of other financial development indicators but its efficiency s influence appears by far weaker although it may cause the change of carbon emissions statistically third china s stock market scale has relatively larger influence on carbon emissions but the influence of its efficiency is very limited this to some extent reflects the relatively lower liquidity in china s stock markets finally among financial development indicators china s fdi exerts the least influence on the change of carbon emissions due to its relatively smaller volume compared with gdp but it is mainly utilized in carbon intensive sectors now therefore with the increase of china s fdi in the future many efforts should be made to adapt its utilizing directions and play its positive role in promoting low carbon development