Assessing the Influence of Financial Inclusion on Environmental Degradation in the ASEAN Region through the Panel PMG-ARDL Approach

Abstract

The rise of financial inclusion in recent years has attracted the attention of environmental economists to assess its role in environmental degradation. Therefore, this study was carried out with the aim of exploring the impact of financial inclusion on environmental degradation in the ASEAN region using balanced panel data for the period 2000–2019. First, panel unit root tests were employed to examine each data series for stationarity. Findings of the panel unit root tests depicted that all data series are stationary at the first difference. Second, Westerlund and Edgerton’s error correction panel cointegration test was employed to handle heterogeneity and cross-sectional dependence. Third, the PMG-ARDL approach was used to explore the long- and short-term effects of financial inclusion on environmental degradation. Findings of the PMG-ARDL found that financial inclusion, energy use, economic growth and urbanization are causing environmental degradation in the ASEAN region. Furthermore, the financial inclusion coefficient is 0.15, which is statistically significant at 5%. In the short run, a 1% increase in financial inclusion results in a 0.15% increase in environmental degradation, ceteris paribus. In the long run, financial inclusion and CO2 have a positive association that is statistically significant at 5% and has a coefficient value of 0.42. This implies that a 1% increase in financial inclusion results in a 0.42% increase in environmental degradation in the long run. Finally, this study recommends that financial inclusion must be incorporated into climate change adaptation efforts at the local, national and regional levels to address the side effects of increased CO2 emissions.

The role of innovation in environmental-related technologies and institutional quality to drive environmental sustainability

“…The above data were obtained from the World Development Indicators (WDI) and in the range of−2.5 to 2.5. All the other variables were chosen based on theory and previous research, such as the work of (Ahmad S et al, 2022;Baajike et al, 2022;Shabir et al, 2022;Amin et al, 2023).…”

“…Because most economical series are found to follow unit root processes. Consequently, this non-stationary data produces inconsistent and misleading findings (Ahmad S et al, 2022). So to examine the series' stationarity, this study employs the CIPS and CADF proposed by Pesaran (2007), called the second-generation panel unit root test.…”

Influence of energy efficient infrastructure, financial inclusion, and digitalization on ecological sustainability of ASEAN countries

“…In addition, environmental economists have focused on FIC in recent years to see how it affects environmental deterioration (UNSGA, 2022). Ahmad et al (2022) explore the relationship between FIC and ecological sustainability in the ASEAN countries using panel data from 2000 to 2019. Their findings imply that FIC negatively influences environmental sustainability due to higher economic expansion.…”

The impact of economic growth, tourism, natural resources, technological innovation on carbon dioxide emission: evidence from BRICS countries

“…The faster economic affairs in the country enhance faster GDP growth, and CO 2 emissions simultaneously, and this is due to the excessive use of fuel which causes many gases to emit into the atmosphere having unhealthy substances that pollute the air. Previous literature including Ali et al ( 2021 ), Ahmad et al ( 2022 ), Ullah et al ( 2022 ), and Noor et al ( 2023 ) have linked various operations of the economy such as energy consumption, technological innovation, globalization, and agricultural operation with environmental degradation. These macroeconomics variables show a substantial impact on expanding carbon emissions in the various countries.…”