Analysis of Stock Market Development and CO₂ Emissions on OECD Countries via an Empirical Model

Accompanying economic growth, CO 2 emissions have polluted the natural environment worldwide. This study highlights the special problems with stock market development and CO 2 emissions in 25 Organization for Economic Cooperation and Development (OECD) countries during 1971–2007 to trace the trend of CO 2 emissions while countries grow their economies. A panel‐data model is applied to analyze the relationships between stock market (SM) development, energy consumption, gross domestic product (GDP), and CO 2 emissions in 25 OECD countries. Low‐GDP countries show different results from high‐GDP countries in the trends of SM development and CO 2 emissions, and dynamic effects occur in SM development and CO 2 emissions under various GDP conditions. There is a negative relationship between SM development and CO 2 emissions if countries enjoy high economic growth, which means that these countries avoid CO 2 emissions through SM development. However, a positive relationship is found between SM development and CO 2 emissions if countries experience low economic growth, which means that SM development does not show the boycott‐effect relationship with CO 2 emissions when countries experience low levels of economic development. This study shows a correlation between SM development and CO 2 emissions among OECD countries.