Kiều hối, phát triển tài chính và môi trường tại BRI - UEH 2024

Bộ GIÁO DỤC VÀ ĐÀO TẠO TRƯỜNG ĐẠI HỌC KINH TÉ TP. HÒ CHÍ MINH BÁO CÁO TỞNG KÉT ĐÈ TÀI NGHIÊN cứu KHOA HỌC THAM GIA XÉT GIẢI THƯỞNG “NHÀ NGHIÊN CỨU TRẺ UEH” NÀM 2024 REMITTANCES, FINANCIAL DEVELOPMENT AND ENVIRONMENTAL QUALITY IN BELT AND ROAD INITIATIVE COUNTRIES: DOES INSTITUTIONAL QUALITY MATTER? Thuộc nhóm chuyên ngành 01. Kinh Tế: Tài chính - Ngân hàng TP. Hồ Chí Minh, tháng 02/2024 1 ABSTRACT This research aims to test the impact of Remittances on Financial Development and Environmental Quality in 123 Belt and Road Initiative Countries from 2012 to 2021 by using S-GMM.

Specifically, the authors found evidence of a positive impact between Remittances and Financial Development and that Remittances increase Environmental Quality by reducing CO2 Emissions. Furthermore, the authors introduce an additional moderating variable, Institutional Quality. The results indicate that countries may benefit when combined with Remittances, leading to their financial development. However, this also results in a significant increase in CO2 Emissions.

The authors also employ two measures for Financial Development (FIN) and Environmental Quality (EQ), respectively Financial Development Index (FD) by IMF and Greenhouse Gas (GAS) for robustness checks. While high-income countries face barriers stemming from environmental regulation that need to be addressed, middle-income countries encounter hurdles in establishing good institutional frameworks, and low-income countries need to strive for even stronger financial economies to aid in the development of their national finances and provide income and stability to citizens. The consistent results between the two measures indicate the robustness of the research findings. Finally, this research provides some policy implications for Belt and Road Initiative countries in general and Vietnam in particular to help ensure sustainable economic development while protecting the environment.

Keywords: Remittances, Financial Development, Environmental Quality, Institutional Quality, BRI countries. 2 LIST OF CONTENT ABSTRACT 1 LIST OF FIGURES AND TABLES 5 LIST OF ABBREVIATIONS 6 CHAPTER 1: INTRODUCTION 7 1. Research structure 14 Summary of Chapter 1 14 CHAPTER 2: THEORETICAL FRAMEWORK, EMPIRICAL EVIDENCES 15 & RESEARCH HYPOTHESIS 15 2. Sustainable Development Theory 18 2.

Environmental Economics Theory 19 2. Environmental Kuznets Curve 19 2. Pollution Haven Hypothesis 20 2.5 The Developmental Optimistic View 21 2. The moderating role of Institutional Quality 21 2.1 The effect of Remittances on Financial Development 23 3 2.2 The effect of Remittances on Environmental Quality 27 2.

The moderating role of Institutional Quality on Remittances, Financial Development and Environmental Quality 30 2. Research Hypothesis 34 Summary of Chapter 2 36 CHAPTER 3: RESEARCH METHODOLOGY 37 3. Data and Sample Selection 37 3. Dependent variables 40 Financial Development (FIN) 40 Environmental Quality (EQ) 40 3.

Independent variables: Remittances (REM) 42 3. Moderating variable: Institutional Quality (1NQ) 42 3. Control variables 43 Income (GDP) 43 Inflation (INF) 43 Trade Openness (TO 1) 44 Foreign Direct Investment (FDI) 45 Population (POP) 45 3. Research methodology 47 Summary of Chapter 3 49 CHAPTER 4: RESEARCH RESULTS 51 4.

Pearson correlation coefficients matrix 57 4. Method comparison test 59 4. Model defects' test 61 4. Generalized Least Squares method (GLS) 63 4 4.

Two Stages Least Square method (2SLS) 64 4. The Generalized Method of Moments estimator (GMM) 67 4. Generalized Method of Moments 67 4. Synthesis of Research Hypotheses 74 CHAPTER 5: CONCLUSION AND POLICY RECOMMENDATIONS 75 5.

Policy implications for Vietnam 80 5. Limitations and further orientation 82 Summary of Chapter 5 82 APPENDIX 83 REFERENCES 109 5 LIST OF FIGURES AND TABLES LIST OF FIGURES Figure 2. Environmental Kuznets Curve.1: Proposed research model. 39 LIST OF TABLES Table 2.1: Summary of Empirical Evidences.1 Descriptive statistics results.2: Pearson correlation coefficients matrix results.3: Regression model results.4: Method comparison test results.5: Model defects’ test results.6: Generalized Least Squares method result.7 : Two Stage Least Square (2SLS) result.8 : Generalized Method of Moments estimator (GMM) result.9: Generalized Method of Moments (Robustness check).10: Table of Research Hypotheses.74 6 LIST OF ABBREVIATIONS Abbreviations Explanation 2SLS Two-stage Least Square BRI Belt and Road Initiative CO2 Cacbon Dioxit EKC Environmental Kuznets Curve EQ Environmental Quality FD Financial Development Index FDI Foreign Direct Investment GAS Greenhouse Gas Emissions GLS Generalized Least Square GMM Generalized Least Square GN I Gross National Income IEA International Energy Agency INF Inflation MNCs Multinational Corporations POP Population REM Remittances TOI Trade Openness UN United Nations 7 CHAPTER 1: INTRODUCTION 1.

Research rationale Carbon dioxide emissions (hereafter CO2) stand as the primary contributor to environmental pollution and climate change. As noted by Rothenberg (2023), before 1850, carbon dioxide primarily originated from the combustion of biomass fuels. However, with the advent of petroleum relining in the 1920s, the trajectory of modernization has become closely tied to the consumption of fossil fuels, leading to an escalating emission of carbon dioxide. The consequence of this trend is climate change, wherein the Earth experiences warming due to the increasing release of carbon dioxide into the atmosphere, diminishing the planet’s ability to sclf-rcgulatc its temperature.

Furthermore, Orsatti et al. (2020) highlight that extensive environmental degradation results from the global overuse and abuse of natural resources. The ecological footprint, a metric quantifying the utilization of natural resources and the generation of waste from human activities (Wackernagel & Rees, 1996), serves as a critical indicator of human impact on ecosystems and the planet. To address the urgent challenges posed by ecosystem deterioration and climate change, a pivotal task is the reduction of the ecological footprint.

Unfortunately, legitimate thresholds for the use of natural capital have been surpassed, necessitating concerted efforts for a reversal of this trend (Kazemzadeh et al. According to data from the Global Footprint Network (2023), the ecological footprint equaled Earth's biocapacity in 1970. However, by 2018, this measure had surged to 1.75 Earths, signaling a perilous deviation from sustainability and emphasizing the pressing need for concerted actions to mitigate the adverse impacts of ecosystem devastation and climate change. In developing nations, particularly those involved in initiatives like the "Belt and Road," the imperative to boost economic growth often leads to a notable increase in carbon dioxide (CO2) emissions.

The International Energy Agency (IEA) provides statistical evidence indicating a rapid and substantial rise in CO2 emissions in Belt and Road Initiative (BRI) countries. This surge is attributed to the processes of industrialization and an upswing in international trade. As of 2017, the statistical data reveals that CO2 emissions from Belt and Road countries surpassed 11.76 billion tons, constituting approximately 35.81% of the total global CO2 emissions. This surge is anticipated to have significant repercussions on global climate change and 8 environmental integrity, as reported by the 1EA in 2019.

Despite the Belt and Road economies contributing to approximately 17% of the total world economy, they concurrently bear responsibility for more than one-third of the world's CO2 emissions. This underscores the dual challenge faced by these economies - striving for economic growth while grappling with the environmental consequences of heightened carbon emissions. The financial industry has played a pivotal role in the progress of human civilization since the onset of the industrial revolution (Le et al. However, the historical lack of attention given by the business sector to ecological considerations has contributed to the emergence or exacerbation of environmental issues such as habitat destruction, resource depletion, climate change, and pollution (He et al.

Despite the significant impact of the financial sector on anthropogenic activities affecting the environment, there has been a notable lack of efforts to integrate environmental concerns into financial practices. The recent focus on environmentally friendly initiatives within the business community has contributed to the promotion of sustainable development. Simultaneously, remittances, stemming from migration, serve as essential gains and compensations to the countries of origin for the depletion of their labor force (Blouchoutzi and Nikas, 2014). Recognized for its efficiency, convenience, and cost-effectiveness, remittance serves as a rapid means of transferring money globally (Imai et al.

A study by De and Ratha (2012) exploring the relationship between remittances and income concurs with this conclusion, indicating that the influx of remittances positively impacts household income, fostering an increase in consumption levels. Brown et al. (2020) add to this perspective by highlighting that Remittances play a constructive role in enhancing the living standards of inhabitants in recipient countries, leading to a reduction in poverty levels through increased job opportunities. Ahmad Ct al.

(2019) assert that the receipt of foreign remittances has a positive influence on personal income, leading to an upswing in individual consumption levels. This, in turn, contributes to an overall boost in aggregate demand. The imperative to meet this heightened demand necessitates an increase in production, consequently leading to a corresponding rise in carbon dioxide 9 (CO2) emissions. However, it is crucial to acknowledge that Remittances have also been associated with a direct correlation to higher levels of CO2 emissions.

Nonetheless, Remittances play a significant role in fostering the development of underdeveloped nations; however, transforming them into comprehensive development necessitates substantial efforts (Umair and Waheed, 2017). While some studies suggest a positive correlation, indicating that an increase in remittances leads to higher CO2 emissions (Yang et al., 2021; Umair et al., 2023), others demonstrate a negative correlation with renewable energy, suggesting that the adoption of renewable energy could help mitigate emissions (Jamil et al. This suggests that the adoption of renewable energy has the potential to effectively reduce carbon dioxide emissions, regardless of the magnitude of remittance inflows. Wang et al.

(2021) investigate the impact of remittances on carbon dioxide emissions in five nations that receive high remittances. The results of the study suggest that remittances have an adverse effect on CO2 emissions. In contrast, another study found that the long-term impact of remittances on CO2 emissions is statistically insignificant (Shah et al. This implies that the influence of remittances on CO2 emissions over an extended period may not be significant.

A substantial body of literature has extensively examined the influence of remittances sent by migrant workers on the financial development of their home countries. For instance, the general consensus is that remittance flows contribute to financial development through their channeling by financial institutions (Aggarwal et al., 2011; Bhattacharya cl al. In a recent study, Fromcnlin (2018) discovered that the influx of remittances enhances financial services, particularly domestic credit to the private sector provided by banks and M2 in Latin America and Caribbean nations. Conversely, Barajas el al.

(2018) reported that while remittances can augment bank balance sheets, they may restrict bank lending due to issues such as asymmetric information, weak financial systems, and suboptimal institutional quality, especially in developing countries. In light of these findings, there exists mixed evidence regarding the impact of remittances on financial development. Additionally, in developing nations characterized by weak institutional frameworks, financial institutions exhibit reluctance to extend credit to high-risk households and businesses due to significant issues related to asymmetric information. 10 Consequently, these financial entities tend to retain remittance funds in savings as they actively seek profitable lending opportunities (Barajas et al.

This implies that in countries with inadequate institutional quality, the progress of financial market development facilitated by remittances is impeded. Similarly, there is evidence indicating that a superior quality of institutions plays a crucial role in advancing financial development (Baltagi et al., 2009; Beck et al., 2000, 2003; Djankov et al. Generally, institutions play a pivotal role in establishing social rules and norms within an economy (Calderon el al. Consequently, in an environment characterized by enhanced institutional quality, the economy operates more systematically, leading to overall improvement.

Notably, high institutional quality has the potential to reduce uncertainty, promote efficiency, and facilitate economic activities, ultimately resulting in superior financial development and economic growth. Choosing Belt and Road Initiative (BRI) countries as the focus of research on the relationship between remittances, financial development, and environmental quality, with the moderating role of institutional quality, is justified for several compelling reasons. Firstly, the BRI represents a massive economic initiative involving strategically significant countries with substantial Chinese investments, making them pertinent subjects for studying financial dynamics.