Nonlinear and Nonparametric Causal Relationship Between Financial Inclusion, Energy Efficiency, and Sustainable Environment in Developed Economies
Journal of the Knowledge Economy
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 efficient ways to help maintain a sustainable environment. The present research is designed to evaluate the association between financial inclusion, energy efficiency, and a sustainable environment in developed economies. The World Bank has regarded financial inclusion as a crucial element for attaining seven Sustainable Development Goals. So, there is a need to examine the causal association between financial inclusion, energy efficiency, and a sustainable environment. We employed the linear Granger causality test, Brock-Dechert-Scheinkman test for nonlinearity, and parameter stability testing. These techniques confirmed 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 findings reveal that financial inclusions play a crucial role in maintaining a sustainable environment, but it is necessary to adopt energy efficiency policies to mitigate emissions. Furthermore, the recommendations for policymakers, government, and future scholars are discussed in the paper.
Financial Inclusion, Energy Efficiency, and Sustainable Environment, Developed Economies, linear Granger causality test, Brock-Dechert-Scheinkman test, parameter stability testing.