Nexus Between Financial Development, FDI, Globalization, Energy Consumption and Environment: Evidence From BRI Countries

Abstract

This study explores the nexus between foreign direct investment, financial development, energy consumption, economic growth and globalization for a selected panel of Belt and Road Initiative (BRI) countries over the period 1990–2016. After employing appropriate panel unit root tests, the Westerlund co-integration test, the DSUR long-run panel estimation approach and the Dumitrescu-Hurlin panel causality test, the results reveal a significant long-run relationship among the analyzed variables. The DSUR results show that energy consumption is boosted by 0.023 and 0.790% when a 1% rise occurs in foreign direct investment and economic growth. A 1% increase in financial development and globalization reduces energy consumption by 0.049 and 0.621%, respectively. We also found bidirectional relationships of energy consumption with financial development and foreign direct investment with globalization for the selected sample of our study. A unidirectional causal relationship exists, moving from energy consumption towards both financial development and foreign direct investment. An increase in FDI, the introduction of energy-efficient technology, and development of the financial sector lead to sustainable economic growth. The findings reveal the need to formulate policies that promote energy efficiency among Belt and Road (BR) countries. The policy implications of this study are presented in the Conclusion.

Financial development, ecological transition, and economic growth in Sub-Saharan African countries: the performing role of the quality of institutions and human capital

“…Inflation worsens the financial system as predicted by most theories. These findings are consistent with Lahiani et al ( 2021 ), Lu et al ( 2021 ), and Usman et al ( 2021 ) in America and Zhe et al ( 2021 ) in Europe. Completing the analysis of previous models, we found evidence of a bilateral causality between economic growth and financial development in Sub-Saharan Africa.…”

“…Macroeconomic factors such as capital, government expenditure, and human capital are a precondition for infrastructure development, promoting financial development (Nkalu et al 2020 ). Recent research also emphasizes the role of energy and the flows of merchandise trade as catalysts for financial development (Shahbaz et al 2021 ; Lu et al 2021 ; Usman et al 2021 ). Therefore, the third equation with financial development as dependent variable is presented as follows: where indicates countries; denotes time period; , and are the parameters; and are the disturbance terms supposed to be with a zero mean and a finite variance .…”

“…On the other side, financial development promotes advanced technological innovations (Cheng et al 2020 ), reduces credit constraints, develops infrastructure, and stimulates industrialization (Lu et al 2021 ). The direct consequence is the increase in jobs and incomes for consumers and lower financial charges for firms which in turn increase investments in renewable energy production.…”

“…Lu et al ( 2021 ) explore the link between financial development, foreign direct investment, energy consumption, and globalization for a selected panel of Belt and Road Initiative (BRI) countries over the period 1990–2016. They highlighted a unidirectional causal relationship from energy consumption to financial development.…”

“…Using a panel vector error correction model (VECM), cointegration, and Granger causality tests from 1975 to 2017, the results support a positive and significant relationship between financial development and energy consumption in the long run, but not in the short run. Lahiani et al (2021) Lu et al (2021) explore the link between financial development, foreign direct investment, energy consumption, and globalization for a selected panel of Belt and Road Initiative (BRI) countries over the period 1990-2016. They highlighted a unidirectional causal relationship from energy consumption to financial development.…”