The impact of financial crises on the relationship between imports, exports, and consumption-based CO2 emissions: Do country income levels matter?

Unlike most extant research that uses production-based CO2 emissions to examine the links between exports/imports and CO2 emissions, in this paper we use consumption-based CO2 emissions to examine the impact of the 2008 global financial crises on the stated relationship for a select sample of countries arranged by income levels. Using the common correlated effects estimator methodology and annual data over the 1990-2019 period, we examine the impact of the 2008 crisis on the stated relationship for a group of high-income, upper middle-income, and lower middle-income countries. Our results suggest that the global financial crisis significantly altered the high-income and lower middle-income countries in terms of the relationship between exports and pollution. The crisis also impacted the lower middle-income countries in terms of the imports/pollution relationship. These findings suggest that a country's income level is important when considering the relationship between exports/imports and pollution following a crisis.