EFFFECT OF FINANCIAL DEVELOPMENT ON CO2 EMISSIONS IN INDONESIA

Abstract

This study aims to examine the effect of financial developments on CO₂ emissions in Indonesia from 1980 to 2019 by adding financial developments as a moderating variable using multiple linear regression analysis. This study extended the STIRPAT framework as a research model. The results of the study found that financial developments had a negative effect on CO₂ emissions and significantly weakened the positive effects of economic growth on CO₂ emissions. In addition, economic growth, energy consumption, and urbanization negatively affect environmental quality. The results revealed that financial developments have an important role in improving environmental quality and controlling CO2 emissions.