Dynamic Impact of Financial Development on Carbon Emissions in Beijing

Financial development has been considered as one of the key factors to estimate carbon emissions demand and set related policies. This paper employs the state-space model to empirically study the dynamic impact of financial development on carbon emissions. The results indicate that:first, there exists a significant long-run equilibrium relationship with time-varying coefficients among carbon emissions, financial development and economic development; second, the impact of financial development on carbon emissions has evident time-varying features;and during the sample period, it may be positive or negative across time; in addition, the contribution of financial development to carbon emissions during the sample period appears much less than that to economic development;specifically, their contributions are around 7% versus 78%.