Is public debt 'curse' or 'benediction' for environmental debt: A panel ARDL approach

This paper studies the effect of public debt on environmental debt by considering the top ten highly indebted countries with annual periods from 1996 to 2022, exploring both the theoretical framework and empirical evidence. For the empirical investigation, the study employs the panel ARDL model, and the robustness of these results is confirmed from the FGLS model. The findings indicate that at the initial level of public debt, it is a "Curse" and at a higher level of public debt, it is a "Benediction" for environmental debt, with the turning point around 99 % of public debt to GDP. It shows there exists a non-linear relationship between public debt and environmental debt. The lower level of public debt increases the environmental debt, and when the debt level increases, the environmental debt falls. Along with this, economic growth, imposing environmental taxes, and the usage of renewable energy help mitigate environmental degradation. However, FDI inflows are positively associated with environmental debt. The study underscores that from the initial level of public debt needs to be managed efficiently by converting its effect from "Curse" to "Benediction" for the ecology.