Gaining insights into environmental impacts of India’s financial markets and institutions with the ARDL approach

This research delves into the intricate interplay between the advancement of financial development and carbon emissions, focusing on the role of green growth in India. Through rigorous analysis, the study observes that the variables under scrutiny exhibit a mixed order of integration, as confirmed by the unit root tests. Further, employing the autoregressive distributed lag (ARDL) model, the present study examines the role of various facets of adopting financial development (financial institutions and financial markets) on carbon emissions in India. Moreover, employing the ARDL bounding F-test, the study reveals a long-run equilibrium relationship in the model. Further, the investigations reveal that the short- and long-run elasticities of financial development on carbon emissions provide mixed results. The finding shows that financial institutions have a positive and statistically significant impact on carbon emissions, which suggests that an increase in financial institutions leads to a rise in carbon emissions in India both in the short and long run. However, the financial market has a negative impact on carbon emissions in India. The study findings hold great importance for policymakers as they provide valuable insights into the intricate impact of financial development on environmental pollution in India. This paves the way for implementing specific policies to enhance financial development and reduce carbon emissions in India.