Revealing empirical association among ecological footprints, renewable energy consumption, real income, and financial development: a global perspective

This study quantifies the effect of real income, financial development, trade openness, and renewable energy consumption on the ecological footprint (EFP) of consumption for a panel data of 152 economies during the period 1990-2017. Several panel unit root tests validate that datasets are stationary. The findings from the Westerlund co-integration test depict that variables are co-integrated. The augmented mean group panel algorithm method is then applied to measure the long-run linkage between variables. The analysis outcomes show a negative and significant association between the EFP and real income per capita in the case of the higher-income group while remaining groups depict the other way round relationship. Further, openness and renewable energy consumption are also observed to reduce EFP in the groups of higher-income and upper-middle-income economies. Finally, financial development is observed to lessen environmental degradation in the case of the higher-income group. Similarly, the results of the Granger causality test based on the Dumitrescu-Hurlin panel provided evidence of varied causality relationship among the variables in different income groups. In addition, we also surpassed an impulse response and variance decomposition analysis that permitted to forecast the impact of concerned variables on environmental degradation during the selected period. Finally, the findings from the empirical analysis suggest that per capita economic growth will have an increasing effect on the EFP for the concerned income group except for higher-income countries in the future.