Impact of Fiscal Decentralization, Natural Resource Rents, and Institutional Quality on Environmental Quality of South Asian Economies

Abstract

This study sheds fresh light on the relationship between CO2 emissions and factors such as fiscal decentralization and natural resource rents. Data from four South Asian nations dating back from 1989 to 2019 are used in this study to measure this goal. The Westerlund and the CS-ARDL methods are used for empirical investigation. The Pesaran 2nd-GEN unit-root assessment determines the order of variable integration. The first difference integration of indicators from the second generation unit root has been brought into being. Fiscal decentralization and natural resource rents have been demonstrated to condense CO2 releases in the long span. Furthermore, when the economy grows, it fails to improve the environmental quality of South Asian economies. On the other hand, institutional quality recovers the environmental quality by mitigating CO2 emissions. It is recommended by this research that local governments should be given greater authority in order to minimize CO2 emissions and move these nations to more ecologically friendly methods of production.