The Impact of Economic Growth, Trade and Financial Development on the Environmental Quality in Iran (on the Basis of Complex Index)

Undesirable environmental changes such as global warming and greenhouse gases emissions rising have created much concerns worldwide during recent decades. Environmental problems emerged from economic activities have become a controversial problem due to achieve higher economic growth rate. The aim of this research is to investigate the effects of economic growth, trade and financial development on environmental quality in Iran. To this end, the statistical data during the period of 1970-2011 has been used. Also by using the Auto Regression Model Distributed Lag (ARDL) short-term and long-term relationships between the variables of model were estimated and analyzed. The results show that financial development and economic growth increase the degradation of the environment. In addition, the rise in trade openness reduces the degradation of the environment. Error correction coefficient (ECM) shows that in each period 51 percent of imbalance will be compensated and it closes to its long run process. CUSUM and CUSUMSQ tests show that the estimated coefficients are stable over the period.