Financial Development, Institutional Quality, and Environmental Degradation Nexus: New Evidence from Asymmetric ARDL Co-Integration Approach

Round 1

Reviewer 1 Report

General thoughts/remarks:

The reviewed paper is focused on a very engaging current aspects as well as interesting research related to this matter. Nowadays it's one of the hottest global subject considered across the world, which has been shown in enormous amount of analysed research and data (indicated by Authors in chapter 2 Literature review).

In my opinion, an existing conflict of interest can be observed everywhere, bearing in mind the good of the environment and the economic aspect. Everything that goes towards environmental protection is still definitely more expensive than cheaper solutions. In turn, such solutions (also and perhaps primarily used by developing countries) cause environmental degradation.

The subject matter has been studied in detail. Available global research was also used. This is a key benefit that will allow the reader to fully understand your article.    

Comments and shortcomings of the article:

• a better solution, in my opinion, would be to use “economic development” instead of “financial development”?;
• why did the Authors mention only these countries? – lines 45-46;
• line 46,169 – should be Turkey not turkey, line 176 – should be China not china, line 427 should be Zivot not zivot, line 492 should be positive not Positive;
• why do Authors use a semicolon instead of a comma in many sentences (line 49, etc.)? Why do Authors use a colon instead of a period in many sentences or semicolon instead of colon? (line 14,etc). In general, punctuation marks should be verified. Check the grammatical forms, please - unless this was the intention of the authors (line 56, 71, 79, 83,etc);
• the article lacks an explanation of the abbreviations used by the authors (each abbreviation or acronym should be explained at least once in the article);
• it needs clarification whether the Authors mean nitrogen dioxide NO₂ or the whole group of nitrogen oxides NO_x (line: 42, 69, etc.);
• line 245 – error in date;
• it is necessary to explain why the research was organized only until 2018;
• it is worth considering extending research from other parts of the world, e.g. America, Europe;
• were the attitudes and habits of the inhabitants also examined?;
• please also clarify whether all tables, charts and diagrams were created by the Authors for the purposes of the specification of this article (no source available under some tables, etc.). Signatures on the chart axes (units) are also missing.;
• references to other scientific papers should be harmonized (in the content of the article)- line 270, 283, etc. brackets are missing;
• line 353 - no reference to World Bank data - also in the References  section there is no data source point and access date;
• line 420 – word “table” is missing;
• research methodology and construction of research models are coherent. But a detailed description of each method needs to be developed (chapters 3.1.2, 3.1.3) -while section 3.1.4 provides descriptive information and gives the reader an in-depth understanding of the subject,  such information is missing from these chapters;
• chapter 4 - explain the markings, please;
• in the final chapters there was no exact reference to the 10 hypotheses assumed by the Authors (chapter 3.1.1)

Conclusion: The article is a source of information about issues related to saving environment.  It suits the magazine profile. I would recommend publishing the article as a subject for further research, after all the above points are completed.

Author Response

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Reviewer 2 Report

In recent times more and more attention has been paid to financial development and environmental issues and in particular to environmental degradation.

This paper fits into this context, being very interesting for having conducted the analysis, highlighting three main aspects, using data from Pakistan for the period 1996-2018.

I believe that the results are very interesting, but they should be described more clearly since the methodological part is a bit confusing.

It would also be interesting to extend the analysis to other geographical contexts so as to understand how the relationship between the variables varies according to the territory in which one operates.

Author Response

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Reviewer 3 Report

Review of

Financial development, institutional quality and environment degradation nexus: new evidence from asymmetric ARDL cointegration approach

Sustainability

Summary

This paper studies the role played by financial development, quality of institutions and trade openness in enhancing the environmental sustainability in Pakistan over the period 1996 - 2018. By using linear and nonlinear cointegration techniques, the authors find that institutional quality plays a positive and pre-eminent role in shaping the environmental sustainability. Moreover, statistically significant long-run effects are also exerted on environmental sustainability and environmental degradation by financial development and trade openness.

Overall Evaluation 

I believe that the paper has potential and deals with an important subject. Nonetheless, in my opinion it is not publishable in its current form, since there are some problems and shortcomings that need to be tackled. In particular, it seems to me that some robustness checks are required in order to confirm the main conclusions on the relationship between the group of selected economic and institutional factors and environmental sustainability and degradation.

Comments

1. I have found a number of typos and mistakes in the text. I would suggest that the authors make a thorough linguistic revision of the paper and carefully check for typos and grammar. It seems to me that such mistakes/typos appear starting from the abstract, e.g. “Phillip Parron” (instead of Phillips Perron) and “Zivote and Andrew” (instead of Zivot and Andrews).
2. Cointegration techniques aim to uncover long-run relations among variables. Therefore I wonder if a sample with 22 observations over 22 years is sufficient to accomplish this task. In addition, it is well known that unit-root tests suffer from low power in small samples. In my opinion, the authors should try to widen the sample and/or use quarterly data. Alternatively, they should discuss at more length their choice on the sample data in relation to the cointegration approach.
3. Although the results are interesting, it seems to me that some robustness checks are required in order to confirm the main conclusions on the relationship between the group of selected economic and institutional factors and environmental sustainability and degradation. For example, are the conclusions robust to the selection of alternative indicators for financial developments or for the quality of institutions?
4. Partially related to the previous point, the financial development index used in this investigation is also based on money supply. Nevertheless, and in general, the evolution of money supply is mainly related to macroeconomic conditions rather than to structural changes in the economic system. Thus, I believe it would be interesting to build also an alternative index that does not include money supply.    
5. I have found the discussion on the results presented in figures 5 and 6 a little confusing. If I understand rightly, in figure 5 the dynamic responses (or dynamic multipliers) of environmental degradation to financial development and institutional are reported, whereas figure 6 reports the dynamic responses of environmental sustainability to the same variables. Nevertheless, it seems that the asymmetric confidence intervals reveal that the dynamic multipliers are not significant at almost all horizons. Please clarify and discuss this point.

Author Response

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Round 2

Reviewer 3 Report

There is still some room for small improvements. For example, the abstract still shows typos (e.g. Phillip Parron and Zivote, and Andrew). Moreover, I have not found a clear answer to the question of cointegration techniques and unit root tests applied to a sample of 22 observations.  On the other hand, I believe that a revision of the paper done in only three days provides a clear message for the reviewers.    

Author Response

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