Financial Development and Environmental Degradation: Promoting Low-Carbon Competitiveness in E7 Economies’ Industries

Guohua Liu, Mohammed Arshad Khan, Ahsanuddin Haider () and Moin Uddin ()
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Guohua Liu: Accounting Faculty, Hebei Vocational University of Technology and Engineering, Xingtai 054000, China
Mohammed Arshad Khan: Department of Accountancy, College of Administrative and Financial Sciences, Saudi Electronic University, Riyadh 11673, Saudi Arabia
Ahsanuddin Haider: Department of Finance, College of Administration and Financial Science, Saudi Electronic University, Riyadh 11673, Saudi Arabia
Moin Uddin: Department of Finance, College of Administration and Financial Science, Saudi Electronic University, Riyadh 11673, Saudi Arabia

IJERPH, 2022, vol. 19, issue 23, 1-16

Abstract: Emerging countries are approaching economic prosperity. However, the development process has enhanced their ecological footprints, thus promoting low-carbon competitiveness among E7 countries’ industries. Therefore, it is essential to identify the factors that affect a country’s ecological footprint (EF) in order to safeguard the environment. This study explored the effect of financial development, human capital, and institutional quality on the EF of emerging countries. Furthermore, we explored the effect of financial development on the EF of emerging countries through the human capital channel. In addition, we investigated the role of institutional quality in the financial development–EF nexus. Using panel data from 1990 to 2018, we employed the cross-sectional autoregressive distributed lag (CS-ARDL) technique to conduct a short-term and long-term empirical analysis. The empirical outcomes revealed that financial development degrades ecological quality by raising the EF. The findings further demonstrated that human capital and institutional quality reduce the EF. Moreover, financial development fosters environmental sustainability through the channel of human capital. Additionally, institutional quality reduces the negative ecological impacts of financial development. The causality analysis suggested that any policy related to financial development, human capital, and institutional quality will affect the EF. However, the inverse conclusion was not sustained. Based on these findings, emerging economies should increase their environmental sustainability by promoting human capital and effectively using financial resources.

Keywords: low carbon; ecological footprint; ecological quality; fostering environmental sustainability (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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