The effect of financial development on ecological footprint in BRI countries: evidence from panel data estimation

  • Muhammad Awais Baloch
  • Jianjun ZhangEmail author
  • Kashif Iqbal
  • Zeeshan Iqbal
Research Article


This work aims to contribute to the existing literature by investigating at the impact of financial development on ecological footprint. To achieve this goal, we have employed Driscoll-Kraay panel regression model for a panel of 59 Belt and Road countries in the period from 1990 to 2016. The findings suggest that financial development increases ecological footprint. Moreover, economic growth, energy consumption, foreign direct investment (FDI), and urbanization pollute the environment by increasing ecological footprint. In addition, several diagnostic tests have been applied to confirm the reliability and validity of the results. From the outcome of the study, various policy implications have been proposed for Belt and Road countries to minimize the ecological footprint.


Financial development Ecological footprint Driscoll-Kraay panel regression BRI countries 



The authors want to say thanks to the Editor Dr. Philippe Garrigues as well as to the two anonymous referees for providing valuable suggestions, which substantially improved this article.

Funding information

The study is supported by the Projects of the National Social Science Foundation of China (No: 15XJL006).


  1. Abbasi F, Riaz K (2016) CO2 emissions and financial development in an emerging economy: an augmented VAR approach. Energy Policy 90:102–114. CrossRefGoogle Scholar
  2. Al-Abdulhadi DJ (2014) An analysis of demand for oil products in Middle East countries. Int J Econ Perspect 8:5–12Google Scholar
  3. Anatasia V (2015) The causal relationship between GDP, exports, energy consumption, and CO2 in Thailand and Malaysia. Int J Econ Perspect 9:37–48Google Scholar
  4. Baloch MA, Danish MF et al (2018) Financial instability and CO2 emissions : the case of Saudi Arabia. Environ Sci Pollut Res 25:26030–26045. CrossRefGoogle Scholar
  5. Bekhet HA, Matar A, Yasmin T (2017) CO2 emissions, energy consumption, economic growth, and financial development in GCC countries: dynamic simultaneous equation models. Renew Sust Energ Rev 70:117–132. CrossRefGoogle Scholar
  6. Charfeddine L (2017) The impact of energy consumption and economic development on ecological footprint and CO2 emissions: evidence from a Markov switching equilibrium correction model. Energy Econ 65:355–374. CrossRefGoogle Scholar
  7. Charfeddine L, Ben Khediri K (2015) Financial development and environmental quality in UAE: cointegration with structural breaks. Renew Sust Energ Rev 55:1322–1335. CrossRefGoogle Scholar
  8. Charfeddine L, Mrabet Z (2017) The impact of economic development and social-political factors on ecological footprint: a panel data analysis for 15 MENA countries. Renew Sust Energ Rev 76:138–154. CrossRefGoogle Scholar
  9. Chin H, He W (2016) The Belt and Road Initiative : 65 Countries and Beyond
  10. Danish, Baloch MA (2017) Dynamic linkages between road transport energy consumption , economic growth , and environmental quality : evidence from Pakistan. Environ Sci Pollut Res 25:7541–7552. CrossRefGoogle Scholar
  11. Danish, Zhang B, Wang B, Wang Z (2017) Role of renewable energy and non-renewable energy consumption on EKC: evidence from Pakistan. J Clean Prod 156:855–864. CrossRefGoogle Scholar
  12. Danish, Baloch MA, Suad S (2018a) Modeling the impact of transport energy consumption on CO2 emission in Pakistan: evidence from ARDL approach. Environ Sci Pollut Res 25:9461–9473. CrossRefGoogle Scholar
  13. Danish, Wang B, Wang Z (2018b) Imported technology and CO 2 emission in China: collecting evidence through bound testing and VECM approach. Renew Sust Energ Rev 82:4204–4214. CrossRefGoogle Scholar
  14. Danish, Saud S, Baloch MA, Lodhi RN (2018c) The nexus between energy consumption and financial development: estimating the role of globalization in Next-11 countries. Environ Sci Pollut Res 25:18651–18661. CrossRefGoogle Scholar
  15. Danish, Zhang B, Wang Z, Wang B (2018d) Energy production, economic growth and CO2 emission: evidence from Pakistan. Nat Hazards 90:27–50. CrossRefGoogle Scholar
  16. Destek MA, Sarkodie SA (2019) Investigation of environmental Kuznets curve for ecological footprint: the role of energy and financial development. Sci Total Environ 650:2483–2489. CrossRefGoogle Scholar
  17. Driscoll JC, Kraay AC (1998) Consistent covariance matrix estimation with spatially dependent panel data. Rev Econ Stat 80:549–560. CrossRefGoogle Scholar
  18. Fethi S, Katircioglu S (2015) The role of the financial sector in the UK economy: evidence from a seasonal cointegration analysis. Econ Res Istraz 28:717–737. CrossRefGoogle Scholar
  19. Fethi S, Katircioǧlu S, Caglar D (2013) The role of the financial sector in the Turkish Cypriot economy: evidence from bounds and causality tests. Turk Stud 14:540–563. CrossRefGoogle Scholar
  20. Gokmenoglu KK, Bekun FV, Taspinar N (2016) Impact of oil dependency on agricultural development in Nigeria. Int J Econ Perspect 10:151–163. CrossRefGoogle Scholar
  21. Guris B (2012) On the relationship between foreign direct investment and GDP in Turkey. Int J Econ Perspect 6:182–187.Google Scholar
  22. Guris S, Sacildi IS, Genc EG (2015) The impact of the 2008 crisis on foreign direct investments: panel Tobit approach. Int J Econ Perspect 9:50–60Google Scholar
  23. Hassan ST, Xia E, Khan NH, Shah SMA (2018) Economic growth, natural resources, and ecological footprints: evidence from Pakistan. Environ Sci Pollut Res.
  24. Islam F, Shahbaz M, Ahmed AU, Alam MM (2013) Financial development and energy consumption nexus in Malaysia: a multivariate time series analysis. Econ Model 30:435–441. CrossRefGoogle Scholar
  25. Jalil A (2014) Energy-growth conundrum in energy exporting and importing countries: Evidence from heterogeneous panel methods robust to cross-sectional dependence. Energy Econ 44:314–324. CrossRefGoogle Scholar
  26. Jenkins HP, Katircioglu ST (2010) The bounds test approach for cointegration and causality between financial development, international trade and economic growth: the case of Cyprus. Appl Econ 42:1699–1707. CrossRefGoogle Scholar
  27. Jumadilova S (2012) The role of oil and gas sector for the economy of Kazakhstan. Int J Econ Perspect 6:295–303Google Scholar
  28. Kalim R, Ali L, Shahbaz M (2012) On foreign direct investment and stock market relation: a case of Pakistan. Int J Econ Perspect 6:98–116Google Scholar
  29. Kapusuzoğlu A (2014) Causality relationships between carbon dioxide emissions and economic growth: results from a multi-country study. Int J Econ Perspect 8:5–15Google Scholar
  30. Katircioglu S (2009) Foreign direct investment and economic growth in Turkey: An empirical investigation by the bounds test for co-integration and causality tests. Econ Res - Ekon istraživanja 22.
  31. Katircioglu S (2011) The bounds test to the level relationship and causality between foreign direct investment and international tourism: the case of Turkey. E M Ekon Manag 14(1):6–13. Google Scholar
  32. Katircioglu, Turan S (2012) Financial development, international trade and economic growth: the case of sub-Saharan Africa. Ekonomista 1:117–127Google Scholar
  33. Katircioğlu S, Katircioğlu S (2017) Testing the role of urban development in the conventional Environmental Kuznets Curve: evidence from Turkey. Appl Econ Lett 25:741–746. CrossRefGoogle Scholar
  34. Katircioglu ST, Naraliyeva A (2006) Foreign direct investment, domestic savings and economic growth In Kazakhstan: evidence from co-integration and causality tests. Invest Manag Financ Innov 3:34–45. Google Scholar
  35. Katircioglu ST, Kahyalar N, Benar H (2007) Financial development, trade and growth triangle: the case of India. Int J Soc Econ 34:586–598. CrossRefGoogle Scholar
  36. Katircioğlu S, Alkhazaleh MMH, Katircioglu S (2018) Interactions between oil prices and financial sectors’ performances: empirical evidence from Amman Stock Exchange. Environ Sci Pollut Res 25:33702–33708. CrossRefGoogle Scholar
  37. Katircioglu S, Gokmenoglu KK, Eren BM (2018a) Testing the role of tourism development in ecological footprint quality : evidence from top 10 tourist destinations. Environ Sci Pollut Res 25:33611–33619. CrossRefGoogle Scholar
  38. Katircioglu S, Katircioğlu S, Altinay M (2018b) Interactions between tourism and financial sector development: evidence from Turkey. Serv Ind J 38:519–542. CrossRefGoogle Scholar
  39. Katircioglu S, Katircioglu S, Altun O (2018c) The moderating role of oil price changes in the effects of service trade and tourism on growth: the case of Turkey. Environ Sci Pollut Res 25:1–10. CrossRefGoogle Scholar
  40. Katircioglu S, Katircioglu S, Kilinc CC (2018d) Investigating the role of urban development in the conventional environmental Kuznets curve: evidence from the globe. Environ Sci Pollut Res 25:15029–15035. CrossRefGoogle Scholar
  41. Kurtovic S, Todorovic JÐ, Siljkovic B (2014) Determinants of foreign direct investments and transition countries of the Western Balkans. Int J Econ Perspect 8:43–57Google Scholar
  42. Maji IK, Habibullah MS, Saari MY (2017) Financial development and sectoral CO2 emissions in Malaysia. Environ Sci Pollut Res 24:7160–7176. CrossRefGoogle Scholar
  43. Mrabet Z, Alsamara M (2017) Testing the Kuznets Curve hypothesis for Qatar: a comparison between carbon dioxide and ecological footprint. Renew Sust Energ Rev 70:1366–1375. CrossRefGoogle Scholar
  44. Nasreen S, Anwar S, Ozturk I (2017) Financial stability, energy consumption and environmental quality: evidence from South Asian economies. Renew Sust Energ Rev 67:1105–1122. CrossRefGoogle Scholar
  45. Nazlioglu S, Yalama A, Aslan M (2009) Financial development and investment: cointegration and causality analysis for the case of Turkey. Int J Econ Perspect 3:107–119. CrossRefGoogle Scholar
  46. Neequaye NA, Oladi R (2015) Environment, growth, and FDI revisited. Int Rev Econ Financ 39:47–56. CrossRefGoogle Scholar
  47. Ozcan B, Ari A (2017) Nuclear energy-economic growth nexus in OECD countries: a panel data analysis. Int J Econ Perspect 11:138–154Google Scholar
  48. Ozokcu, Selin Ozdemir O (2017) Regression with Driscoll-Kraay standard errors. Renew Sustain Energy Rev 72:639–647Google Scholar
  49. Ozturk I, Al-Mulali U, Saboori B (2016) Investigating the environmental Kuznets curve hypothesis: the role of tourism and ecological footprint. Environ Sci Pollut Res 23:1916–1928. CrossRefGoogle Scholar
  50. Park Y, Meng F, Baloch MA (2018) The effect of ICT, financial development, growth, and trade openness on CO2emissions: an empirical analysis. Environ Sci Pollut Res 25:30708–30719. CrossRefGoogle Scholar
  51. Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J Appl Econ 47:36–37. CrossRefGoogle Scholar
  52. Rudolph A, Figge L (2017) Determinants of ecological footprints: what is the role of globalization? Ecol Indic 81:348–361. CrossRefGoogle Scholar
  53. Sadorsky P (2010) The impact of financial development on energy consumption in emerging economies. Energy Policy 38:2528–2535. CrossRefGoogle Scholar
  54. Saqib N, Waheed A (2011) Financial sector reforms and macroeconomic performance: policy simulations based on financial macroeconomic model for Pakistan. Int J Econ Perspect 5:241–260Google Scholar
  55. Sarkodie SA, Strezov V (2019) Effect of foreign direct investments, economic development and energy consumption on greenhouse gas emissions in developing countries. Sci Total Environ 646:862–871. CrossRefGoogle Scholar
  56. Shahbaz M, Hye QMA, Tiwari AK, Leitão NC (2013) Economic growth, energy consumption, financial development, international trade and CO2emissions in Indonesia. Renew Sust Energ Rev 25:109–121. CrossRefGoogle Scholar
  57. Shahbaz M, Jam FA, Bibi S, Loganathan N (2016) Multivariate Granger causality between CO2 emissions, energy intensity and economic growth in Portugal: evidence from cointegration and causality analysis. Technol Econ Dev Econ 22:47–74. CrossRefGoogle Scholar
  58. Shahbaz M, Van HTH, Mahalik MK, Roubaud D (2017) Energy consumption, financial development and economic growth in India: new evidence from a nonlinear and asymmetric analysis. Energy Econ 63:199–212. CrossRefGoogle Scholar
  59. Sodeyfi S (2016) Review of literature on the nexus of financial leverage, product quality, & business conditions. Int J Econ Perspect 10:146–150Google Scholar
  60. Sodeyfi S, Katircioglu S (2016) Interactions between business conditions, economic growth and crude oil prices. Econ Res Istraživanja 29:980–990. CrossRefGoogle Scholar
  61. Solarin SA, Al-mulali U (2018) Influence of foreign direct investment on indicators of environmental degradation. Environ Sci Pollut Res 25:24845–24859. CrossRefGoogle Scholar
  62. Soukhakian B (2007a) Financial development, trade openness and economic growth in Japan: evidence from Granger causality tests. Int J Econ Perspect 1:117–126Google Scholar
  63. Soukhakian N (2007b) Financial development and economic growth in Iran: evidence from co-integration and causality tests. Int J Econ Perspect 1:56–63Google Scholar
  64. Taşpınar N (2014) Foreign direct investment, domestic savings and economic growth: the case of Turkey. Int J Econ Perspect 8:12–21Google Scholar
  65. Tutulmaz O (2015) Environmental Kuznets Curve time series application for Turkey: why controversial results exist for similar models? Renew Sust Energ Rev 50:73–81. CrossRefGoogle Scholar
  66. Uddin GA, Salahuddin M, Alam K, Gow J (2017) Ecological footprint and real income: panel data evidence from the 27 highest emitting countries. Ecol Indic 77:166–175. CrossRefGoogle Scholar
  67. Ulucak R, Bilgili F (2018) A reinvestigation of EKC model by ecological footprint measurement for high, middle and low income countries. J Clean Prod 188:144–157. CrossRefGoogle Scholar
  68. Waheed A, Younus N (2010) Effects of Financial Sector’s Development and Financial Sector’s Efficiency on Economic Growth: Empirical Evidence from Developing and Developed Countries. Int J Econ Perspect 4:449–458Google Scholar
  69. Xu Z, Baloch MA, Danish, Meng F, Zhang J, Mahmood Z (2018) Nexus between financial development and CO2 emissions in Saudi Arabia: analyzing the role of globalization. Environ Sci Pollut Res 25:28378–28390. CrossRefGoogle Scholar
  70. Yilmaz NT, Can T (2016) The analysis of foreign direct investment with hidden markov model: evidence from Turkey. Int J Econ Perspect 10:117–133Google Scholar
  71. Zhang Y-J (2011) The impact of financial development on carbon emissions: an empirical analysis in China. Energy Policy 39:2197–2203. CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.School of Management and EconomicsBeijing Institute of TechnologyBeijingChina
  2. 2.School of Economics and ManagementXi’dian UniversityXi’anChina
  3. 3.School of Economics and ManagementBeijing University of Posts and TelecommunicationsBeijingChina
  4. 4.School of Public AdministrationUniversity of International Business and EconomicsBeijingChina

Personalised recommendations