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The role of environmental degradation in macroeconomic instability: panel evidence from emerging economies

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Abstract

This study examines the role of environmental degradation in macroeconomic instability for a balanced panel sample of 22 emerging market economies from 1996 to 2019. Governance is included in the macroeconomic instability function as a moderating factor. Besides, bank credit and government spending are also included in the estimated function as control variables. The long-run results from using the PMG-ARDL method show that environmental degradation and bank credit induce macroeconomic instability, whereas governance and government spending reduce it. Interestingly, environmental degradation creates greater macroeconomic instability than the bank credit. We also find that governance being a moderating factor weakens the adverse impact of environmental degradation on macroeconomic instability. These findings are robust to the FGLS technique, suggesting that governments in emerging economies should prioritize environmental degradation and governance in mitigating climate change and ensuring macroeconomic stability in the long run.

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Data availability

Data used in the analysis can be made available upon request.

Notes

  1. The countries’ list is provided in the Appendix. This study uses the MSCI country classification, which can be found at https://www.msci.com/documents/1296102/1330218/MSCI-Country-Classification-Standard-cfs-en.pdf.

  2. The result is presented in Table 11 (Appendix).

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Acknowledgements

We are thankful to the Editor-in-Chief and handling Editor of this journal for providing us the kind opportunity to revise our manuscript. We are also thankful to the reviewers for their valuable comments and suggestions that enabled us to improve the manuscript significantly. Finally, this is based on the PhD work of Anjan Kumar Sahu, who is working under the supervision of second author. We are thankful to DSC members of the first author for their valuable inputs in reshaping this work into its current form.

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Authors and Affiliations

  1. Department of Humanities and Social Sciences, Indian Institute of Technology Kharagpur, Kharagpur, West Bengal, 721302, India

    Anjan Kumar Sahu, Mantu Kumar Mahalik, Gupteswar Patel & Shreya Pal

Authors
  1. Anjan Kumar Sahu
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  2. Mantu Kumar Mahalik
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  3. Gupteswar Patel
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  4. Shreya Pal
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Contributions

Anjan Kumar Sahu: data collection, estimation, and writing original draft. Mantu Kumar Mahalik: supervision, reviewed, restructured, and finalized the draft. Gupteswar Patel: conceptualization and reviewed and finalized the original draft. Shreya Pal: data curation and helped in the estimation process.

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Correspondence to Mantu Kumar Mahalik.

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Appendix

Appendix

List of emerging countries

(1) Brazil, (2) Chile, (3) China, (4) Colombia, (5) Czech Republic, (6) Egypt, (7) Greece, (8) Hungary, (9) India, (10) Indonesia, (11) Kuwait, (12) South Korea, (13) Malaysia, (14) Mexico, (15) Peru, (16) Philippines, (17) Poland, (18) Saudi Arabia, (19) South Africa, (20) Thailand, (21) Turkey, (22) United Arab Emirates.

Table 10 Data description, definition, and sources
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Table 11 Dumitrescu and Hurlin Granger causality test
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Sahu, A.K., Mahalik, M.K., Patel, G. et al. The role of environmental degradation in macroeconomic instability: panel evidence from emerging economies. Environ Sci Pollut Res 30, 86879–86891 (2023). https://doi.org/10.1007/s11356-023-28389-w

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