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How Do Institutional Quality, Natural Resources, Renewable Energy, and Financial Development Reduce Ecological Footprint without Hindering Economic Growth Trajectory? Evidence from China

Author

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  • Muhammad Sohail Amjad Makhdum

    (Department of Economics, Government College University, Faisalabad 38000, Pakistan)

  • Muhammad Usman

    (China Institute of Development Strategy and Planning, Center for Industrial Economics, Wuhan University, Wuhan 430072, China)

  • Rakhshanda Kousar

    (Institute of Agricultural and Resource Economics, Faculty of Social Sciences, University of Agriculture, Faisalabad 38000, Pakistan)

  • Javier Cifuentes-Faura

    (Faculty of Economics and Business, University of Murcia, Campus Universitario, 30100 Murcia, Spain)

  • Magdalena Radulescu

    (Department of Finance, Accounting and Economics, University of Pitesti, 110040 Pitesti, Romania
    Institute for Doctoral and Post-Doctoral Studies, University “Lucian Blaga” Sibiu, Bd. Victoriei, No. 10, 550024 Sibiu, Romania)

  • Daniel Balsalobre-Lorente

    (Department of Political Economy and Public Finance, Economic and Business Statistics and Economic Policy, University of Castilla La-Mancha, 02071 Albacete, Spain
    Department of Applied Economics, University of Alicante, 03690 Alicante, Spain)

Abstract

Institutional quality, financial development, and natural resources primarily determine how economic representatives support their operational and production behaviors towards escalating the renewable energy share in the whole energy mix and protecting ecological quality. In this way, this paper is the first to investigate the influence of institutional quality, natural resources, financial development, and renewable energy on economic growth and the environment simultaneously in China from 1996 to 2020. The cointegration approaches verify the presence of a long-run association between the selected variables. The autoregressive distributed lag model outcomes reveal that institutional quality and renewable energy utilization greatly diminish ecological footprint. At the same time, other prospective indicators such as financial expansion and natural resources significantly enhance ecological footprint levels in the short- and long-run. Furthermore, institutional quality, financial expansion, renewable energy, and natural resources significantly trigger economic growth. Besides this, this study has revealed the unidirectional causal association from institutional quality and financial expansion to ecological footprint. In contrast, bidirectional causality occurs between renewable energy, natural resources, ecological footprint, and economic growth. The current research results offer some policy implications that will help to reduce the detrimental influence of environmental deprivation, without hindering the economic growth trajectory in the case of China.

Suggested Citation

  • Muhammad Sohail Amjad Makhdum & Muhammad Usman & Rakhshanda Kousar & Javier Cifuentes-Faura & Magdalena Radulescu & Daniel Balsalobre-Lorente, 2022. "How Do Institutional Quality, Natural Resources, Renewable Energy, and Financial Development Reduce Ecological Footprint without Hindering Economic Growth Trajectory? Evidence from China," Sustainability, MDPI, vol. 14(21), pages 1-25, October.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:21:p:13910-:d:954180
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