Nonlinear and Nonparametric Causal Relationship Between Financial Inclusion, Energy Efciency, and Sustainable Environment in Developed Economies

Qiaoqi, Lang and Asadullah, Khaskheli and Syed Ali, Raza and Komal Akram, Khan and Puah, Chin Hong (2024) Nonlinear and Nonparametric Causal Relationship Between Financial Inclusion, Energy Efciency, and Sustainable Environment in Developed Economies. Journal of the Knowledge Economy, 15. pp. 5121-5150. ISSN 1868-7873

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Abstract

A sustainable environment is as important as the economy’s growth, but, unfortunately, economic growth is environmentally unsustainable. Hence, there is a need to adopt efcient ways to help maintain a sustainable environment. The present research is designed to evaluate the association between fnancial inclusion, energy efciency, and a sustainable environment in developed economies. The World Bank has regarded fnancial inclusion as a crucial element for attaining seven Sustainable Development Goals. So, there is a need to examine the causal association between fnancial inclusion, energy efciency, and a sustainable environment. We employed the linear Granger causality test, Brock-Dechert-Scheinkman test for nonlinearity, and parameter stability testing. These techniques confrmed the presence of a nonlinear association and structural breaks between proposed variables. Later, the nonparametric causality in the quantiles technique has been employed for the analysis. The fndings reveal that fnancial inclusions play a crucial role in maintaining a sustainable environment, but it is necessary to adopt energy efciency policies to mitigate emissions. Furthermore, the recommendations for policymakers, government, and future scholars are discussed in the paper.

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