The Impact Of Financial Development And Underground Economy On Carbon Emissions

In 2008,China surpassed the United States to become the world’s largest carbon dioxide emitter.To achieve emission reduction and green economic growth,China cannot do without the support and development of China’s finance.In addition,the scale of China’s underground economy continues to expand,which has caused a serious impact on China’s environmental regulation and exacerbated the domestic carbon emissions.Therefore,it is of great significance to clarify the relationship among financial development,underground economy and carbon emissions for China to achieve emission reduction targets.Although many scholars have conducted a large number of theoretical and empirical studies on the relationship among financial development,underground economy and carbon emissions,few scholars have studied the relationship among the three in a single model.Most scholars may ignore the impact of underground economy on carbon emissions,so the proposed measures for energy conservation and emission reduction may not be effective.Based on the analysis of existing literature,this paper shows that financial development may regulate the impact of underground economy on carbon emissions.In view of this,this paper constructs Multiple Indicators and Multiple Causes Model(MIMIC)based on structural equation principle to estimate the scale of China’s underground economy from 2003 to 2019.Based on the provincial panel data of30 provinces and cities in China from 2003 to 2019,a fixed effect model was constructed to analyze the impact of financial development and underground economy on carbon emissions.This paper also analyzes the regional heterogeneity of financial development regulating the impact of underground economy on carbon emissions and explains the reasons for the regional heterogeneity through the threshold model.The results show that :(1)the scale of China’s underground economy from 2003 to 2019 is 10%-20%;(2)There is an inverted "U" relationship between financial development and carbon emissions;(3)The underground economy has a significant positive impact on carbon emissions,and the underground economy promotes carbon emissions;(4)Financial development has a negative moderating effect on carbon emissions of underground economy,that is,when financial development is at a high level,the scale of underground economy has a small impact on carbon emissions;when financial development is at a low level,the scale of underground economy has a large impact on carbon emissions.