An empirical nexus between economic growth, energy utilization, trade policy, and ecological footprint: a continent-wise comparison in upper-middle-income countries

This study investigates the causal connection between economic growth, foreign direct investment, primary and renewable energy utilization, trade openness, and ecological footprint for 33 upper-middle-income countries (UMICs) from Africa, Asia, Europe, and America during the period from 1994 to 2017. Initially, first- as well as second-generation panel unit root tests are applied to check the integration order after confirming the cross-sectional dependency and heterogeneity. Four different tests (FMOLS, DOLS, FGLS, and AMG) are applied to estimate the long-run elasticity, whereas Dumitrescu and Hurlin (D-H) non-causality test is used to test growth, conservation, and feedback hypothesis. Results show negative relationship of economic growth on ecological footprint in Africa and Europe; renewable energy utilization in Asia, Europe, and America; and trade openness in Asia. Moreover, the results revealed an adverse impact of trade openness on ecological footprint in case of Africa and America. Furthermore, the results of D-H panel non-causality test confirm the growth hypothesis for economic growth to ecological footprint in Africa, Asia, and Europe; foreign direct investment to ecological footprint in Africa and Asia; primary energy utilization to ecological footprint in Asia; renewable energy utilization to ecological footprint in America; and trade openness to ecological footprint in Africa, Asia, and America. Furthermore, the feedback hypothesis was confirmed between economic growth and ecological footprint in Asia and Europe; foreign direct investment and ecological footprint in Africa and Asia; renewable energy utilization and ecological footprint for America; and trade openness and ecological footprint for Asia and America. Finally, in context to efficient policy implications, it is suggested to associate the economic growth with clean energy and environment-friendly technologies by expanding the share of renewable energy in America and economic growth in Africa and Europe. Furthermore, Asian policy makers need to focus on foreign direct investment and trade openness by using green energy to overcome the environmental degradation. Impulsion with these findings, the central authorities of UMICs need to focus on more investments in environmental quality not only through foreign direct investment but also exchanging their clean energy technologies through trade policies such as tax exemption, feed-in tariffs, and subsidies. Government of these countries ought to upgrade the conventional capital which will ultimately improve the human lives by providing clean environment.