Financial development, globalization and ecological footprint in G7: further evidence from threshold cointegration and f
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Financial development, globalization and ecological footprint in G7: further evidence from threshold cointegration and fractional frequency causality tests Ugur Korkut Pata1
· Veli Yilanci2
Received: 6 May 2020 / Revised: 13 September 2020 / Accepted: 23 September 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This paper empirically explores the dynamic relationships between financial development, globalization, energy consumption, economic growth, and ecological footprint in G7 countries over the period 1980–2015. Using a recently introduced threshold cointegration test with an endogenous structural break, the paper aims primarily to determine the effects of financial development and globalization on environmental degradation. The results confirm the presence of cointegration in Canada, Italy, and Japan. The long-run estimates indicate that globalization significantly reduces ecological footprint in Canada and Italy, while financial development reduces pollution in Japan. The findings also demonstrate that energy consumption stimulates environmental degradation in these three countries. Furthermore, the causality test that considers smooth structural breaks via a fractional frequency flexible Fourier function indicates that globalization causes ecological footprint in all the G7 countries except France, while financial development causes ecological footprint in France, Japan, and the United Kingdom. Finally, the overall results suggest that globalization is a more effective tool than financial development in regulating ecological footprint for G7 countries. Therefore, we recommend that policymakers should make use of the opportunities that globalization offers to solve environmental problems.
Handling Editor: Pierre Dutilleul.
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Ugur Korkut Pata [email protected]; [email protected] Veli Yilanci [email protected]; [email protected]
1
Department of Economics, Faculty of Economics and Administrative Sciences, Osmaniye Korkut Ata University, Merkez, Osmaniye 80000, Turkey
2
Department of Econometrics, Faculty of Political Sciences, Sakarya University, Esentepe Campus, Serdivan, Sakarya 54050, Turkey
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Environmental and Ecological Statistics
Keywords Globalization · Financial development · Ecological footprint · Fourier frequency · G7 countries
1 Introduction Environmental problems such as desertification, deforestation, global warming, and climate change have adverse social and economic effects on societies. Climate change, which disrupts the balance of the ecosystem, can cause air pollution and serious climate events (Charfeddine and Khediri 2016). Over the past three decades, the underlying causes and consequences of global warming and climate change problems have been empirically analyzed in various studies. According to energy economics literature, the two factors that have the most significant impact on the environment are energy consumption and economic growth (Rahman et al. 2019a). High natural resources and fossil fuel energy consumptio
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