Causal Effect of the Private Financial System on Environmental Deterioration: Empirical Evidence for 100 Countries Grouped by Income

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Published: mar. 19, 2022
DOI: https://doi.org/10.54753/rve.v10i1.1296

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Viviana Álvarez
Carrera de Economía, Universidad Nacional de Loja, Loja, Ecuador
Johanna Alvarado-Espejo
Carrera de Economía, Universidad Nacional de Loja, Loja, Ecuador

Abstract

The aim of this research is to examine the causal link between the private financial system and the ecological footprint. Panel data were used for 100 countries for the period 1980 – 2017. The Westerlund (2007) cointegration technique and the Dumitrescu & Hurlin (2012) causality test were used to examine the relationship between the variables. The main results indicate that the private financial system increases environmental degradation globally, in upper-middle-income countries and in lower-middle-income countries. Likewise, the results show that there is an equilibrium relationship in the short and long term between the variables. The causality test indicates that the ecological footprint and the private financial system have a bidirectional relationship. This is significant globally and in high-income countries. On the other hand, there is a one-way causality from the private financial system to the ecological footprint in upper-middle-income countries. A possible policy implication derived from the research is that financial institutions should focus on offering loans with preferential rates that encourage investment in environmentally friendly projects.

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How to Cite
Álvarez, V., & Alvarado-Espejo, J. (2022). Causal Effect of the Private Financial System on Environmental Deterioration: Empirical Evidence for 100 Countries Grouped by Income. Revista Económica, 10(1), 100–109. https://doi.org/10.54753/rve.v10i1.1296
Issue
Vol. 10 No. 1 (2022): RVE Vol 10 (January - June 2022)
Section
RESEARCH ARTICLES
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