Financial development, globalization and ecological footprint in G7: further evidence from threshold cointegration and fractional frequency causality tests


PATA U. K., YILANCI V.

Environmental and Ecological Statistics, vol.27, no.4, pp.803-825, 2020 (SCI-Expanded) identifier

  • Publication Type: Article / Article
  • Volume: 27 Issue: 4
  • Publication Date: 2020
  • Doi Number: 10.1007/s10651-020-00467-z
  • Journal Name: Environmental and Ecological Statistics
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, IBZ Online, ABI/INFORM, Agricultural & Environmental Science Database, Aquatic Science & Fisheries Abstracts (ASFA), BIOSIS, CAB Abstracts, Environment Index, Geobase, Greenfile, Pollution Abstracts, Veterinary Science Database, Civil Engineering Abstracts
  • Page Numbers: pp.803-825
  • Keywords: Ecological footprint, Financial development, Fourier frequency, G7 countries, Globalization
  • Hatay Mustafa Kemal University Affiliated: Yes

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.