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Disaggregated financial development and ecological sustainability: the critical role of urbanization, energy utilization, and economic growth in next 11 economies

Author

Listed:
  • Mahjabeen Usman

    (International Islamic University)

  • Sumayya Chughtai

    (International Islamic University)

  • Abdul Rashid

    (International Islamic University)

  • Nasir Khan

    (University of Central Punjab)

Abstract

Significant demand for ecological services and diminishing environmental issues pose severe threats to the existence of humanity. Some scholars believe that the rapid development of financial sectors may add to this problem. Therefore, this study evaluates the impact of disaggregated financial development on the ecological footprint of the Next-11 countries using the panel data from 1995 to 2019. For in-depth empirical analysis, financial development is divided into three categories: banking sector development, insurance market development, and stock market development. Each class comprises four indicators, and the composite index is constructed using principal component analysis. Results of the unit tests indicate that variables are stationary at mix orders some variables are stationary at the level and others are stationary at the 1st difference. By utilizing DCCE and AMG estimations model. The study has confirmed the existence of the Environmental Kuznets Curve (EKC) hypothesis in sampled countries by showing the inverted U-shaped relation between economic growth and ecological footprints. The results also revealed that both stock market development and banking sector development decrease ecological footprints and could help protect the quality of the environment. Furthermore, the findings show that municipal is inseparably linked to environmental adversity in the Next 11 countries. Therefore, to safeguard the ecological footprint in the Next-11 countries, sustainable practices with green financial development accompanied by green urbanization are among the appropriate solutions.

Suggested Citation

  • Mahjabeen Usman & Sumayya Chughtai & Abdul Rashid & Nasir Khan, 2024. "Disaggregated financial development and ecological sustainability: the critical role of urbanization, energy utilization, and economic growth in next 11 economies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(5), pages 11455-11474, May.
    • Handle: RePEc:spr:endesu:v:26:y:2024:i:5:d:10.1007_s10668-023-03368-w
    DOI: 10.1007/s10668-023-03368-w
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    Keywords

    Banking sector development; Insurance market development; Stock market development; Ecological footprint; Next-11 countries;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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