IDEAS home Printed from https://ideas.repec.org/a/eee/renene/v199y2022icp1005-1015.html
   My bibliography  Save this article

How financial development and digital trade affect ecological sustainability: The role of renewable energy using an advanced panel in G-7 Countries

Author

Listed:
  • Zhang, Xudong
  • Song, Xueqian
  • Lu, Jianguang
  • Liu, Fei

Abstract

Ecological sustainability has now become a primary concern of nations. The gradual increase in greenhouse gasses (GHGs) emanation has created an alarming situation in recent decades. The rapid increase in economic growth extends the ecological footprint of advanced economies. Although various studies have explored numerous factors contributing to achieving ecological sustainability, very few are known regarding financial development and digital trade impact. Hence the study considers financial development and digital trade as crucial determinants of the ecological footprint of G-7 countries. For this purpose, the study employed the CUP-FM “continuously updated fully modified” and CUP-BC “continuously updated bias-corrected” estimators on the panel data of G-7 countries from 2000 to 2020. The coefficients of the long-run parameters show a negative association between digital trade, renewable energy consumption, and ecological footprint, whereas financial development has a significantly positive relationship with the ecological footprint. It implies that financial stability encourages investment in carbon-intensive economic activities; therefore, financial development causes environmental degradation in G-7 countries. In contrast, digital trade enhances technological innovations’ penetration, which helps ensure ecological sustainability. Likewise, the increased renewable energy consumption minimizes fossil fuel consumption, thus reducing the ecological footprint of G-7 countries. Lastly, this study endorsed Environmental Kuznets Curve and offered policy directions to ensure environmental sustainability in G-7 economies.

Suggested Citation

  • Zhang, Xudong & Song, Xueqian & Lu, Jianguang & Liu, Fei, 2022. "How financial development and digital trade affect ecological sustainability: The role of renewable energy using an advanced panel in G-7 Countries," Renewable Energy, Elsevier, vol. 199(C), pages 1005-1015.
    • Handle: RePEc:eee:renene:v:199:y:2022:i:c:p:1005-1015
    DOI: 10.1016/j.renene.2022.09.028
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0960148122013787
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.renene.2022.09.028?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Razzaq, Asif & Sharif, Arshian & An, Hui & Aloui, Chaker, 2022. "Testing the directional predictability between carbon trading and sectoral stocks in China: New insights using cross-quantilogram and rolling window causality approaches," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    2. Joakim Westerlund & David L. Edgerton, 2008. "A Simple Test for Cointegration in Dependent Panels with Structural Breaks," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(5), pages 665-704, October.
    3. Zhang, Rui & Sharma, Rajesh & Tan, Zhixiong & Kautish, Pradeep, 2022. "Do export diversification and stock market development drive carbon intensity? The role of renewable energy solutions in top carbon emitter countries," Renewable Energy, Elsevier, vol. 185(C), pages 1318-1328.
    4. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    5. Minhaj Ali & Shujahat H. Hashmi & Muhammad R. Nazir & Ahmer Bilal & Muhammad I. Nazir, 2021. "Does financial inclusion enhance economic growth? Empirical evidence from the IsDB member countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5235-5258, October.
    6. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    7. Fu, Zheng & Chen, Zhiguo & Sharif, Arshian & Razi, Ummara, 2022. "The role of financial stress, oil, gold and natural gas prices on clean energy stocks: Global evidence from extreme quantile approach," Resources Policy, Elsevier, vol. 78(C).
    8. Mahmood, Ahmad & Zahoor, Ahmed & Xiyue, Yang & Nazim, Hussain & Sinha, Avik, 2021. "Financial development and environmental degradation: Do human capital and institutional quality make a difference?," MPRA Paper 110039, University Library of Munich, Germany, revised 2021.
    9. Honma, Satoshi & Yoshida, Yushi, 2020. "An empirical investigation of the balance of embodied emission in trade: Industry structure and emission abatement," Economic Modelling, Elsevier, vol. 92(C), pages 277-294.
    10. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    11. Muhammad Wasif Zafar & Muhammad Mansoor Saleem & Mehmet Akif Destek & Abdullah Emre Caglar, 2022. "The dynamic linkage between remittances, export diversification, education, renewable energy consumption, economic growth, and CO2 emissions in top remittance‐receiving countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(1), pages 165-175, February.
    12. Pata, Ugur Korkut, 2021. "Linking renewable energy, globalization, agriculture, CO2 emissions and ecological footprint in BRIC countries: A sustainability perspective," Renewable Energy, Elsevier, vol. 173(C), pages 197-208.
    13. Ibrahim D. Raheem & Aviral K. Tiwari & Daniel Balsalobre-lorente, 2019. "The Role of ICT and Financial Development on CO2 Emissions and Economic Growth," Working Papers of the African Governance and Development Institute. 19/058, African Governance and Development Institute..
    14. Shittu, Waliu & Adedoyin, Festus Fatai & Shah, Muhammad Ibrahim & Musibau, Hammed Oluwaseyi, 2021. "An investigation of the nexus between natural resources, environmental performance, energy security and environmental degradation: Evidence from Asia," Resources Policy, Elsevier, vol. 73(C).
    15. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    16. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    17. Usman, Muhammad & Jahanger, Atif & Makhdum, Muhammad Sohail Amjad & Balsalobre-Lorente, Daniel & Bashir, Adnan, 2022. "How do financial development, energy consumption, natural resources, and globalization affect Arctic countries' economic growth and environmental quality? An advanced panel data simulation," Energy, Elsevier, vol. 241(C).
    18. Pata, Ugur Korkut & Caglar, Abdullah Emre, 2021. "Investigating the EKC hypothesis with renewable energy consumption, human capital, globalization and trade openness for China: Evidence from augmented ARDL approach with a structural break," Energy, Elsevier, vol. 216(C).
    19. Danish I. Godil & Zhang Yu & Arshian Sharif & Rimsha Usman & Syed Abdul Rehman Khan, 2021. "Investigate the role of technology innovation and renewable energy in reducing transport sector CO2 emission in China: A path toward sustainable development," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(4), pages 694-707, July.
    20. Usman, Muhammad & Khalid, Khaizran & Mehdi, Muhammad Abuzar, 2021. "What determines environmental deficit in Asia? Embossing the role of renewable and non-renewable energy utilization," Renewable Energy, Elsevier, vol. 168(C), pages 1165-1176.
    21. Chien, Fengsheng & Anwar, Ahsan & Hsu, Ching-Chi & Sharif, Arshian & Razzaq, Asif & Sinha, Avik, 2021. "The role of information and communication technology in encountering environmental degradation: Proposing an SDG framework for the BRICS countries," Technology in Society, Elsevier, vol. 65(C).
    22. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 239-253.
    23. Shahbaz, Muhammad & Destek, Mehmet Akif & Dong, Kangyin & Jiao, Zhilun, 2021. "Time-varying impact of financial development on carbon emissions in G-7 countries: Evidence from the long history," Technological Forecasting and Social Change, Elsevier, vol. 171(C).
    24. Zhou, Xiaoyong & Zhou, Dequn & Wang, Qunwei & Su, Bin, 2019. "How information and communication technology drives carbon emissions: A sector-level analysis for China," Energy Economics, Elsevier, vol. 81(C), pages 380-392.
    25. Irfan, Muhammad & Razzaq, Asif & Sharif, Arshian & Yang, Xiaodong, 2022. "Influence mechanism between green finance and green innovation: Exploring regional policy intervention effects in China," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    26. Sun, Yunpeng & Bao, Qun & Siao-Yun, Wei & Islam, Misbah ul & Razzaq, Asif, 2022. "Renewable energy transition and environmental sustainability through economic complexity in BRICS countries: Fresh insights from novel Method of Moments Quantile regression," Renewable Energy, Elsevier, vol. 184(C), pages 1165-1176.
    27. Sun, Yunpeng & Anwar, Ahsan & Razzaq, Asif & Liang, Xueping & Siddique, Muhammad, 2022. "Asymmetric role of renewable energy, green innovation, and globalization in deriving environmental sustainability: Evidence from top-10 polluted countries," Renewable Energy, Elsevier, vol. 185(C), pages 280-290.
    28. Chong Wang & Peter W Cardon & Jing Liu & Ghulam Rasool Madni, 2020. "Social and economic factors responsible for environmental performance: A global analysis," PLOS ONE, Public Library of Science, vol. 15(8), pages 1-12, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Canghong & Zheng, Chaoliang & Hu, Caishuang & Luo, Yibin & Liang, Miya, 2023. "Resources sustainability and energy transition in China: Asymmetric role of digital trade and policy uncertainty using QARDL," Resources Policy, Elsevier, vol. 85(PB).
    2. Saud, Shah & Haseeb, Abdul & Zafar, Muhammad Wasif & Li, Huiyun, 2023. "Articulating natural resource abundance, economic complexity, education and environmental sustainability in MENA countries: Evidence from advanced panel estimation," Resources Policy, Elsevier, vol. 80(C).
    3. Xia, Aiming & Liu, Qing, 2024. "Modelling the asymmetric impact of fintech, natural resources, and environmental regulations on ecological footprint in G7 countries," Resources Policy, Elsevier, vol. 89(C).
    4. Wang, Shubin & Li, Jiabao & Zhao, Erlong, 2024. "Exploring the role of financial technologies and digital trade in shaping trade-adjusted resource consumption in E7 countries," Resources Policy, Elsevier, vol. 88(C).
    5. Kostakis, Ioannis & Arauzo-Carod, Josep-Maria, 2023. "The key roles of renewable energy and economic growth in disaggregated environmental degradation: Evidence from highly developed, heterogeneous and cross-correlated countries," Renewable Energy, Elsevier, vol. 206(C), pages 1315-1325.
    6. Ashraf, Muhammad Zubair & Wei, Wei & Usman, Muhammad & Mushtaq, Shahid, 2024. "How can natural resource dependence, environmental-related technologies and digital trade protect the environment: Redesigning SDGs policies for sustainable environment?," Resources Policy, Elsevier, vol. 88(C).
    7. Huang, Chenchen & Lin, Boqiang, 2023. "Promoting decarbonization in the power sector: How important is digital transformation?," Energy Policy, Elsevier, vol. 182(C).
    8. Yingchao, He & Xiang, Yijun, 2024. "Influence of trade liberalization and digital trade on material footprint in the BRICS region," Resources Policy, Elsevier, vol. 88(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yang, Bin & Wu, Qiong & Sharif, Arshian & Uddin, Gazi Salah, 2023. "Non-linear impact of natural resources, green financing, and energy transition on sustainable environment: A way out for common prosperity in NORDIC countries," Resources Policy, Elsevier, vol. 83(C).
    2. Sun, Yunpeng & Guan, Weimin & Mehmood, Usman & Yang, Xiaodong, 2022. "Asymmetric impacts of natural resources on ecological footprints: Exploring the role of economic growth, FDI and renewable energy in G-11 countries," Resources Policy, Elsevier, vol. 79(C).
    3. Meng, Yue & Wu, Haoyue & Wang, Yunchen & Duan, Yinying, 2022. "International trade diversification, green innovation, and consumption-based carbon emissions: The role of renewable energy for sustainable development in BRICST countries," Renewable Energy, Elsevier, vol. 198(C), pages 1243-1253.
    4. Li, Tianyu & Umar, Muhammad & Mirza, Nawazish & Yue, Xiao-Guang, 2023. "Green financing and resources utilization: A story of N-11 economies in the climate change era," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1174-1184.
    5. Luo, Shunjun & Mabrouk, Fatma, 2022. "Nexus between natural resources, globalization and ecological sustainability in resource-rich countries: Dynamic role of green technology and environmental regulation," Resources Policy, Elsevier, vol. 79(C).
    6. Liu, Jili & Kim Loan, Vo Thi & Mousa, Saeed & Ali, Anis & Muda, Iskandar & Cong, Phan The, 2023. "Sustainability and natural resources management in developed countries: The role of financial inclusion and human development," Resources Policy, Elsevier, vol. 80(C).
    7. Sevgi SEZER, 2017. "The effects of real exchange rates and income on the trade balance: A second generation panel data analysis for transition economies and Turkey," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(611), S), pages 171-186, Summer.
    8. Li, Qingtao & Sharif, Arshian & Razzaq, Asif & Yu, Yangyu, 2022. "Do climate technology, financialization, and sustainable finance impede environmental challenges? Evidence from G10 economies," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    9. Faik Bilgili & Daniel Balsalobre-Lorente & Sevda Kuşkaya & Mohammed Alnour & Seyit Önderol & Mohammad Enamul Hoque, 2024. "Are research and development on energy efficiency and energy sources effective in the level of CO2 emissions? Fresh evidence from EU data," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 24183-24219, September.
    10. Zhang, Ren Jie & Razzaq, Asif, 2022. "Influence of economic policy uncertainty and financial development on renewable energy consumption in the BRICST region," Renewable Energy, Elsevier, vol. 201(P1), pages 526-533.
    11. Chopra, Ritika & Magazzino, Cosimo & Shah, Muhammad Ibrahim & Sharma, Gagan Deep & Rao, Amar & Shahzad, Umer, 2022. "The role of renewable energy and natural resources for sustainable agriculture in ASEAN countries: Do carbon emissions and deforestation affect agriculture productivity?," Resources Policy, Elsevier, vol. 76(C).
    12. Usman, Muhammad & Makhdum, Muhammad Sohail Amjad, 2021. "What abates ecological footprint in BRICS-T region? Exploring the influence of renewable energy, non-renewable energy, agriculture, forest area and financial development," Renewable Energy, Elsevier, vol. 179(C), pages 12-28.
    13. Fang, Shuya & Fang, Wei, 2023. "How fiscal decentralization and trade diversification influence sustainable development: Moderating role of resources dependency," Resources Policy, Elsevier, vol. 84(C).
    14. Khan, Yasir & Hassan, Taimoor & Guiqin, Huang & Nabi, Ghulam, 2023. "Analyzing the impact of natural resources and rule of law on sustainable environment: A proposed policy framework for BRICS economies," Resources Policy, Elsevier, vol. 86(PA).
    15. Muhammad Shafiullah & Luke Emeka Okafor & Usman Khalid, 2019. "Determinants of international tourism demand: Evidence from Australian states and territories," Tourism Economics, , vol. 25(2), pages 274-296, March.
    16. Liu, Fengyu & Feng, Jue & Zhai, Ge & Razzaq, Asif, 2022. "Influence of fiscal decentralization and renewable energy investment on ecological sustainability in EU: What is the moderating role of institutional governance?," Renewable Energy, Elsevier, vol. 200(C), pages 1265-1274.
    17. Khalid, Usman & Shafiullah, Muhammad, 2021. "Financial development and governance: A panel data analysis incorporating cross-sectional dependence," Economic Systems, Elsevier, vol. 45(2).
    18. Yilmaz Bayar & Djula Borozan & Marius Dan Gavriletea, 2021. "Banking sector stability and economic growth in post‐transition European Union countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 949-961, January.
    19. Alataş, Sedat, 2022. "Do environmental technologies help to reduce transport sector CO2 emissions? Evidence from the EU15 countries," Research in Transportation Economics, Elsevier, vol. 91(C).
    20. Li, Zeyun & Qadus, Abdul & Maneengam, Apichit & Mabrouk, Fatma & Shahid, Muhammad Sadiq & Timoshin, Anton, 2022. "Technological innovation, crude oil volatility, and renewable energy dimensions in N11 countries: Analysis based on advance panel estimation techniques," Renewable Energy, Elsevier, vol. 191(C), pages 204-212.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:renene:v:199:y:2022:i:c:p:1005-1015. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/renewable-energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.