The impact of gross domestic product, financial development, energy consumption on environmental quality: With emphasis on six environmental indicators

Document Type : Research Paper

Author

Department of Management and Accounting, Ayandegan Institute of Higher Education, Tonekabon, Iran

10.22059/jne.2023.346356.2469

Abstract

The dynamic link between economic growth and environmental quality has drawn the attention of numerous scholars to the problem of clean production and sustainable development. In light of this backdrop, the goal of this study is to provide a framework for discovering a good understanding of economic policies in connection to sustainable environments by looking at the mediating role of financial development. In this regard, the System Generalized Method of Moment (SYS-GMM) estimator is used to investigate the role of financial development in the effect of economic growth on six environmental indicators for selected 30 Organization for Economic Cooperation and Development (OECD) countries from 2000 to 2019. The results showed that along with the effect of economic growth on each of the environmental indicators, including ecological footprint, adjusted net savings, pressure on nature, and environmental performance, financial development weakens this effect. Meanwhile, no significant relationship has been observed regarding the indicators of environmental sustainability and environmental vulnerability. In other words, the negative impact of economic growth on environmental quality is not independent of financial development; so that with the gradual improvement of financial development, economic growth will have a less negative impact on the quality of the environment. Moreover, regarding each of the environmental indicators, energy consumption has a positive effect on environmental degradation. However, trade openness and financial development have positive influences on environmental quality. Given the critical role of financial development in mitigating the detrimental effects of economic growth on the quality of the environment, governments are urged to boost the financial development sector in their macroeconomic policies.

Keywords


Articles in Press, Accepted Manuscript
Available Online from 01 February 2023