A causal link between financialization and ecological status: a novel framework for Asian countries?

Area of Science:

• Environmental Economics
• Sustainable Development
• International Trade

Background:

• Sustainable finance and green trade are critical for green growth.
• Limited understanding exists on financialization and trade openness's inclusive impact on ecological status beyond air pollution.
• Existing literature often provides inconclusive findings on environmental performance.

Purpose of the Study:

• To analyze the role of financial dimensions and trade openness in environmental performance.
• To examine these relationships across three income-based panels of Asian countries (low, middle, high) from 1990-2020.

Main Methods:

• Utilized novel panel data analysis.
• Employed the Granger non-causality technique to assess relationships.

Main Results:

• Financialization was found to contribute to environmental deterioration, rather than improving environmental quality.
• Low and middle-income Asian economies can leverage trade openness to improve energy efficiency and ecological status.
• High-income Asian countries exhibit increased energy consumption and a tendency to overlook ecological challenges.

Conclusions:

• Financialization poses a risk to environmental quality, necessitating careful management.
• Targeted policies leveraging trade openness are recommended for lower-income Asian nations.
• High-income nations require strategies to mitigate energy consumption's environmental impact and address ecological concerns.