The Determinants of Environmental Quality - An Analysis of Balkan Countries

Abstract

This thesis aims to discover the possible effect of financial market development, in relationship with other factors, on environmental quality from 2000 to 2020, using CO2 emission as the primary indicator of environmental degradation. It focuses on nine Balkan countries, considered as transitional and developing economies namely Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Montenegro, North Macedonia, Romania, and Serbia. The used data in this thesis is retrieved from reliable sources. Two regressors, GDP growth and energy consumption, have a significant positive impact on CO2 emission, indicating that higher energy use and economic activity contribute to environmental degradation in the region. While, financial development and urbanization proxies were found to have no impact. This suggests that, within the current structure of Balkan economies, financial systems and urban growth do not play a direct role in shaping the environmental quality. These findings highlight the need for environmental policies that target energy efficiency and sustainable management of economic growth. Additionally, the results indicate to a potential need for further development and integration of green finance initiatives in the financial sector to support environmental improvements in the future.