Promoting Environmental Quality with Financial Development in Iran: An Asymmetric Analysis with NARDL Approach

Iran is known as a significant oil-exporting country; however, its effort in adopting green policies and the presence of the imposed global sanctions that highly affected its financial sector led the country to face a dilemma in achieving more sustainable growth. This study is designed to investigate the asymmetric impacts of financial development on the environment, taking into consideration the annual data of Iran from 1980 to 2019. The Nonlinear Autoregressive Distributive Lag approach is used for analysing the present research model. The results of this research validates the Environmental Kuznets Curve. Asymmetric impacts of financial development, where positive changes lead to a negative effect, while its negative changes positively impact on the emission of pollutants is supported. This is compelling evidence for the Iranian authorities and calls attention to the need to improve proper and effective finance-oriented regulations, mainly in the presence of sanctions, to boost the importance of the financial sector in the country's environmental path. This study is limited to Iran, but is essential considering the dearth of literature on how the environment can be enhanced in this nation.