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Does financial development influence the overall natural environment? An environmental performance index (EPI) based insight from the ASEAN countries

Author

Listed:
  • Rana Muhammad Adeel-Farooq

    (University of Sahiwal)

  • Jimoh Olajide Raji

    (Universiti Utara Malaysia)

  • Ghulam Muhmmad Qamri

    (Nankai University)

Abstract

The protection of the natural environment is the central concern of the Sustainable Development Goals of the United Nations. Therefore, all countries are struggling to formulate policies for sustainable development. In this context, this study examines the consequences of financial development, and some controlled variables such as economic growth, energy consumption, and urbanization on the overall environmental performance of five developing ASEAN economies, namely Malaysia, Indonesia, Thailand, Vietnam, and the Philippines over the period of 2003–2016. This study employs the Environmental Performance Index (EPI) constructed by Yale University for environmental performance instead of CO2 emissions, a single variable for environmental conditions. This study uses fixed effect, random effect, Newey West, and generalized least square estimators for empirical analysis. The empirical findings divulge that financial development positively affects the environmental performance of these countries. Nonetheless, energy usage and urbanization have a negative relationship with the EPI of these countries Moreover; findings show confirms the validity of the EKC hypothesis in these countries. The study suggests that policymakers of these countries should provide credit for the environment-friendly, energy-efficient, and green projects. Additionally, policies should be designed for sustainable economic development that encourages the use of renewable energy. In addition, renewable energies should be subsidized instead of fossil fuel-based energies.

Suggested Citation

  • Rana Muhammad Adeel-Farooq & Jimoh Olajide Raji & Ghulam Muhmmad Qamri, 2023. "Does financial development influence the overall natural environment? An environmental performance index (EPI) based insight from the ASEAN countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(6), pages 5123-5139, June.
    • Handle: RePEc:spr:endesu:v:25:y:2023:i:6:d:10.1007_s10668-022-02258-x
    DOI: 10.1007/s10668-022-02258-x
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    More about this item

    Keywords

    ASEAN; Economic growth; Energy consumption; Environmental performance index (EPI); Financial development;
    All these keywords.

    JEL classification:

    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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