Assessing the Influence of Financial Inclusion on Environmental Degradation in the ASEAN Region through the Panel PMG-ARDL Approach

Seemab Ahmad, Dilawar Khan and Róbert Magda
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Seemab Ahmad: Department of Economics, Kohat University of Science and Technology, Kohat 26000, Pakistan
Dilawar Khan: Department of Economics, Kohat University of Science and Technology, Kohat 26000, Pakistan
Róbert Magda: Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, 2100 Godollo, Hungary

Sustainability, 2022, vol. 14, issue 12, 1-17

Abstract: The rise of financial inclusion in recent years has attracted the attention of environmental economists to assess its role in environmental degradation. Therefore, this study was carried out with the aim of exploring the impact of financial inclusion on environmental degradation in the ASEAN region using balanced panel data for the period 2000–2019. First, panel unit root tests were employed to examine each data series for stationarity. Findings of the panel unit root tests depicted that all data series are stationary at the first difference. Second, Westerlund and Edgerton’s error correction panel cointegration test was employed to handle heterogeneity and cross-sectional dependence. Third, the PMG-ARDL approach was used to explore the long- and short-term effects of financial inclusion on environmental degradation. Findings of the PMG-ARDL found that financial inclusion, energy use, economic growth and urbanization are causing environmental degradation in the ASEAN region. Furthermore, the financial inclusion coefficient is 0.15, which is statistically significant at 5%. In the short run, a 1% increase in financial inclusion results in a 0.15% increase in environmental degradation, ceteris paribus. In the long run, financial inclusion and CO 2 have a positive association that is statistically significant at 5% and has a coefficient value of 0.42. This implies that a 1% increase in financial inclusion results in a 0.42% increase in environmental degradation in the long run. Finally, this study recommends that financial inclusion must be incorporated into climate change adaptation efforts at the local, national and regional levels to address the side effects of increased CO 2 emissions.

Keywords: financial inclusion; environmental degradation; PMG-ARDL approach; ASEAN (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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