Spillover effects of neighboring regions on the interrelationships of financial development, energy consumption, and green GDP within a regional union
Document Type : Research Paper
Authors
Department of Agricultural Economics, Tarbiat Modares University, Tehran, Iran.
10.22059/jne.2026.396675.2813
Abstract
This study explores the spatial spillover effects of energy consumption and financial development on Green Gross Domestic Product (GGDP) in Economic Cooperation Organization (ECO) member countries during the period 2005–2023. Employing a Spatial Autoregressive (SAR) model, the research evaluates the dynamic interrelations among energy consumption, financial development, trade openness, government expenditure, labor force, and capital inventory, incorporating spatial dependencies arising from geographical and economic proximity among ECO nations. Key findings reveal that fossil fuel consumption significantly decreases GGDP, highlighting the environmental cost of reliance on nonrenewable energy. Similarly, financial development negatively impacts GGDP by promoting industrial activities without adequate environmental safeguards. Conversely, trade openness, government expenditure, labor force participation, and capital inventory positively influence GGDP, underscoring their roles in fostering sustainable economic growth. A notable discovery is the positive spatial lag effect, indicating that the GGDP of one country benefits from improvements in neighboring countries through clean technology transfer, green goods trade, and shared environmental policies. These findings emphasize the importance of regional collaboration for advancing sustainable development. The study recommends substantial investment in renewable energy infrastructure, policy reforms to enhance trade openness, and regional cooperation in environmental and energy policies to mitigate fossil fuel dependence and improve environmental quality. The study's conclusions provide actionable insights for ECO policymakers, advocating for a holistic approach to green growth that integrates economic, social, and environmental strategies. Future research should broaden the geographical scope and employ advanced methodologies to capture nonlinear and complex interdependencies, ensuring more robust and generalized findings.
Keywords
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