Financial Market Depth, Access, and Efficiency and Environment Nexus in MENA Region: Cross-Sectional Dependence Analysis

Financial markets have great potential to reduce environmental issues and promote sustainability in line with the Sustainable Development Goals (SDGs). The research aims to examine the impact of financial market access, depth, and efficiency on CO2 emissions in 17 MENA countries from 1980 to 2021. Gross domestic product (GDP) per capita has a positive effect on CO2 emissions. However, its square term does not impact CO2 emissions. Moreover, financial market access (FMA) and financial market depth (FMD) contribute to increased emissions, whereas financial market efficiency (FME) has a mitigating effect on emissions. The findings suggest that policymakers and regulators in the MENA region should enhance FME to further reduce CO2 emissions. However, FMA and FMD require policy intervention to limit the financing for pollution-intensive activities and promote funding for renewable projects to support a cleaner environment in the region.