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Is there a tradeoff between financial globalization, economic growth, and environmental sustainability? An advanced panel analysis

DOI:10.1007/s11356-021-15878-z
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Shauku Starford Kihombo at Beijing Institute of Technology
Shauku Starford Kihombo
Arif I Vaseer
Arif I Vaseer
Arif I Vaseer
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Zahoor Ahmed at Cyprus International University
Zahoor Ahmed
Songsheng Chen
Songsheng Chen
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Abstract and Figures

In recent years, many empirical studies investigated the effects of globalization on the ecological footprint (EF). Most of these studies relied on the KOF index of globalization and studied the effects of total globalization and disaggregated impacts of economic, social, and political globalization on the EF. However, less attention has been given to financial globalization which can also influence the EF. Hence, this study investigates the association between financial globalization (FG), economic growth (GDP), and EF controlling population density (PD) in the selected West Asian and the Middle East (WAME) nations from 1990 to 2017. The study relied upon second-generation methods for checking stationary properties and Westerlund and other techniques to scrutinize cointegration. The evidence showed cointegration in the model. The long-run approximations from continuously updated fully modified (CUP-FM) and continuously updated bias corrected (CUP-BC) tests divulge that financial globalization is an important factor to promote ecological sustainability in the sample countries because it decreases EF. Population density exacerbates EF and worsens environmental deterioration in sample countries. The study detected the environmental Kuznets curve (EKC) between EF and economic growth in the presence of financial globalization and population density. Besides, financial globalization Granger causes EF, while the feedback effect exists between EF and economic growth. Based on these results, WAME economies can accomplish ecological sustainability and sustainable development by enhancing their financial globalization levels.
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RESEARCH ARTICLE
Is there a tradeoff between financial globalization, economic growth,
and environmental sustainability? An advanced panel analysis
Shauku Kihombo
1
&Arif I. Vaseer
2
&Zahoor Ahmed
3
&Songsheng Chen
1
&Dervis Kirikkaleli
4
&
Tomiwa Sunday Adebayo
5
Received: 23 June 2021 / Accepted: 5 August 2021
#The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2021
Abstract
In recent years, many empirical studies investigated the effects of globalization on the ecological footprint (EF). Most of these
studies relied on the KOF index of globalization and studied the effects of total globalization and disaggregated impacts of
economic, social, and political globalization on the EF. However, less attention has been given to financial globalization which
can also influence the EF. Hence, this study investigates the association between financial globalization (FG), economic growth
(GDP), and EF controlling population density (PD) in the selected West Asian and the Middle East (WAME) nations from 1990 to
2017. The study relied upon second-generation methods for checking stationary properties and Westerlund and other techniques to
scrutinize cointegration. The evidence showed cointegration in the model. The long-run approximations from continuously updated
fully modified (CUP-FM) and continuously updated bias corrected (CUP-BC) tests divulge that financial globalization is an
important factor to promote ecological sustainability in the sample countries because it decreases EF. Population density exacerbates
EF and worsens environmental deterioration in sample countries. The study detected the environmental Kuznets curve (EKC)
between EF and economic growth in the presence of financial globalization and population density. Besides, financial globalization
Granger causes EF, while the feedback effect exists between EF and economic growth. Based on these results, WAME economies
can accomplish ecological sustainability and sustainable development by enhancing their financial globalization levels.
Keywords Financial globalization .Ecological footprint .Economic growth .Environmental sustainability
Introduction
In the last three decades, an expansion in the globalization
process has boosted production and as a result, financial
development (FD) has emerged as an important factor behind
the economic progress of countries (Kirikkaleli and Adebayo
2021;Erdoğan et al. 2020). However, FD along with rapid
production has stimulated energy consumption increasing
Responsible Editor: Nicholas Apergis
*Songsheng Chen
chenss@bit.edu.cn
*Tomiwa Sunday Adebayo
twaikline@gmail.com
Shauku Kihombo
skihombo@gmail.com
Arif I. Vaseer
vaseer@cust.edu.pk
Zahoor Ahmed
Zahoorahmed83@yahoo.com
Dervis Kirikkaleli
dkirikkaleli@eul.edu.tr
1
School of Management and Economics, Beijing Institute of
Technology, South-Zhongguancun Street, Beijing 100081, People’s
Republic of China
2
Faculty of Management Sciences, Capital University of Science and
Technology, Islamabad, Pakistan
3
Department of Economics, Faculty of Economics and Administrative
Sciences, Cyprus International University, 10, Haspolat,
99040 Mersin, Turkey
4
Faculty of Economic and Administrative Sciences, Department of
Banking and Finance, European University of Lefke, Lefke,
Northern Cyprus, TR-10 Mersin, Turkey
5
Faculty of Economics and Administrative Science, Department of
Business Administration, Cyprus International University, Nicosia,
Northern Cyprus, TR-10 Mersin, Turkey
https://doi.org/10.1007/s11356-021-15878-z
/ Published online: 16 August 2021
Environmental Science and Pollution Research (2022) 29:3983–3993
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
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