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Does financial development moderate the link between technological innovation and environmental indicators? An advanced panel analysis

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  • Hossein Ali Fakher

    (Ayandegan Institute of Higher Education)

  • Zahoor Ahmed

    (Bahçeşehir Cyprus University
    New Uzbekistan University)

Abstract

This study analyzes the role of financial development (FD) on the impact of technological innovation (TI) on six environmental quality indicators for the 25 economies that are part of the Organization for Economic Cooperation and Development for the period from 2000 to 2019. We use a two-step dynamic generalized method of moments approach to understand this relationship. The results show that FD augments the positive effects of TI on four of the six environmental indicators, namely ecological footprint, adjusted net savings, pressure on nature, and environmental performance. However, no significant effects on environmental sustainability and environmental vulnerability indices were found. When considering all of the environmental quality indicators, TI appears to enhance environmental quality. We find evidence to support the existence of the environmental Kuznets curve in the context of each environmental indicator and economic growth. Moreover, FD and energy consumption appear to accelerate environmental degradation. Based on these results, FD should be viewed as an important parameter in designing policies for innovation to achieve the goal of net-zero carbon emissions.

Suggested Citation

  • Hossein Ali Fakher & Zahoor Ahmed, 2023. "Does financial development moderate the link between technological innovation and environmental indicators? An advanced panel analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-19, December.
    • Handle: RePEc:spr:fininn:v:9:y:2023:i:1:d:10.1186_s40854-023-00513-2
    DOI: 10.1186/s40854-023-00513-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Technological innovation; Financial development; Two-step dynamic Sys-GMM estimator; Environmental quality indicators; Environmental sustainability;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • 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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