The Dual Impact of Remittances and Financial Development on Environmental Pollution: Evidence from South Asian Countries

Abstract

This study investigates the dual impact of remittances and financial development on environmental pollution across South Asian countries. Remittances inflow and financial development are not only significant determinants of economic growth but also factors that can contribute to environmental degradation. By analyzing panel data spanning from 1984 to 2017, the study employs panel OLS and fixed effect models to assess the relationship between remittances, financial development, and environmental pollution. The findings of this research are expected to provide valuable insights into the complex interplay between economic factors and environmental sustainability in the context of South Asian countries. The results of the co-integration test reveal the existence of a long-term relationship between the variables under investigation. Specifically, remittances, financial development, energy consumption, and foreign direct investment are identified as leading contributors to environmental degradation. Conversely, trade emerges as a factor that positively influences environmental quality. These findings highlight the complex dynamics between economic activities and their environmental impacts, underscoring the importance of sustainable development policies that consider the trade-offs between economic growth and environmental conservation. The governments of South Asian countries must address the conflicting effects of remittances on environmental quality by implementing stringent regulations on highly polluting industries and enforcing rigorous financial oversight measures. This approach is essential to mitigate the negative environmental consequences associated with remittance inflows, such as increased pollution levels. By imposing strict controls and monitoring mechanisms, authorities can ensure that economic activities supported by remittances do not compromise environmental sustainability. Additionally, investments in cleaner technologies and renewable energy sources should be encouraged to promote greener growth trajectories while harnessing the benefits of remittance inflows for economic development.