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Financial Risk and Environmental Sustainability in Poland: Evidence from Novel Fourier-Based Estimators

Author

Listed:
  • Kwaku Addai

    (Department of Business Administration, Faculty of Economic and Administrative Sciences, European University of Lefke, Lefke 99010, Turkey)

  • Sema Yılmaz Genç

    (Department of Economics, Yildiz Technical University, Yildiz 34349, Turkey)

  • Rui Alexandre Castanho

    (Faculty of Applied Sciences, WSB University, 41-300 Dąbrowa Górnicza, Poland
    College of Business and Economics, University of Johannesburg, P.O. Box 524, Auckland Park, Johannesburg 2092, South Africa)

  • Gualter Couto

    (School of Business and Economics and CEEAplA, University of Azores, 9500-321 Ponta Delgada, Portugal)

  • Ayhan Orhan

    (Department of Economics, Kocaeli University, Kocaeli 41001, Turkey)

  • Muhammad Umar

    (School of Economics, Qingdao University, Qingdao 266071, China
    Adnan Kassar School of Business, Lebanese American University, Beirut 1102-2801, Lebanon)

  • Dervis Kirikkaleli

    (Department of Banking and Finance, Faculty of Economics and Administrative Sciences, European University of Lefke, Lefke 99010, Turkey)

Abstract

Using Fourier-based ARDL and Fourier Toda Yamamoto causality methods, this study aims to detect the impact of financial risk on environmental sustainability in Poland while controlling economic growth, primary energy consumption, and renewable energy consumption from 1990Q1 to 2019Q4. The outcomes of the Fourier ADL cointegration test indicate all variables are cointegrated. Additionally, the Fourier ARDL long-form estimates indicate both renewable energy consumption and financial risk contribute to reducing environmental degradation in Poland. However, the Fourier ARDL long-form estimates show that both primary energy consumption and economic growth have detrimental impacts on the economy’s level of environmental degradation. Analysis of causality direction with the Fourier Toda Yamamoto causality test indicates both financial risk and renewable energy consumption for the period had a one direction causal effect on environmental degradation. For policy insight, the government could support environmental policies requiring companies to factor climate-related risks into their supervision and financial stability monitoring. The Polish government requires financial institutions to prioritize climate risk scenarios in stress testing to control catastrophic weather-related losses.

Suggested Citation

  • Kwaku Addai & Sema Yılmaz Genç & Rui Alexandre Castanho & Gualter Couto & Ayhan Orhan & Muhammad Umar & Dervis Kirikkaleli, 2023. "Financial Risk and Environmental Sustainability in Poland: Evidence from Novel Fourier-Based Estimators," Sustainability, MDPI, vol. 15(7), pages 1-19, March.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:7:p:5801-:d:1108381
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