Evaluation of the Relationship Between Ecological Footprint, Economic and Political Stability Variables in SAARC Countries with PVAR Analysis

Mohammad Tawfiq Noorzai, Aziz Kutlar, Aneta Bełdycka-Bórawska, Tomasz Rokicki and Piotr Bórawski ()
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Mohammad Tawfiq Noorzai: Department of Economics, Faculty of Economics, Kabul University, Kabul 1015, Afghanistan
Aziz Kutlar: Department of Economics, Faculty of Political Sciences, Sakarya University, Sakarya 54050, Turkey
Aneta Bełdycka-Bórawska: Department of Economic Theory, Institute of Economics and Finance, Faculty of Economic Sciences, University of Warmia and Mazury in Olsztyn, 10-719 Olsztyn, Poland
Tomasz Rokicki: Institute of Management, Warsaw University of Life Sciences, 02-787 Warsaw, Poland
Piotr Bórawski: Department of Economic Theory, Institute of Economics and Finance, Faculty of Economic Sciences, University of Warmia and Mazury in Olsztyn, 10-719 Olsztyn, Poland

Energies, 2025, vol. 18, issue 20, 1-22

Abstract: South Asia faces the dual challenge of sustaining rapid economic growth while managing severe ecological pressures. This study explores the relationship between Ecological Footprint (EF), Financial Development (FD), Economic Growth (GDP), Foreign Direct Investment (FDI), and Political Stability (PS) in SAARC countries from 2000 to 2020. Using a Panel Vector Autoregression (PVAR) combined with a Vector Error Correction Model (VECM), the analysis captures both short-run dynamics and long-run equilibrium relationships, addressing endogeneity among variables. Results reveal that EF negatively correlates with FD, GDP, and FDI, while showing a positive association with PS. Cointegration tests using dynamic and fully modified ordinary least squares confirm long-term relationships between the variables. Impulse response functions illustrate how shocks to one variable affect others over time, highlighting complex interactions. Granger causality tests suggest limited short-term causal links, reflecting the multifaceted nature of these relationships. This research is particularly relevant as SAARC countries face the dual challenge of sustaining rapid economic growth while mitigating ecological pressures. The study advances the literature by explicitly integrating political stability into the environmental–economic nexus, a factor often overlooked in earlier regional analyses. By providing empirical evidence on the joint role of economic, financial, and political drivers of ecological sustainability, the paper contributes both to academic debate and to the design of more balanced policy frameworks for sustainable development in South Asia.

Keywords: ecological footprint; economic growth; political stability; PVAR; SAARC (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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