Linking economic globalization, economic growth, financial development, and ecological footprint: Evidence from symmetric and asymmetric ARDL

Abstract

Abstract Over the past few years, a growing number of scholars employed ecological footprint (EP) as a proxy of environmental deterioration because this comprehensive indicator effectively captures environmental degradation. However, the literature on driving factors of the ecological footprint indicates diverse findings, and the majority of the studies explore symmetric relationships. Taking this in view, the current study uses both symmetric and asymmetric methods to examine the nexus between ecological footprint, economic globalization, economic growth, and financial development, controlling for population density and energy consumption in the third-largest economy Japan. The study uses advanced unit root methods including the Narayan-Popp and CMR unit root tests with two breaks to determine unit root properties. The asymmetric and symmetric ARDL methods are used to probe cointegration and long-run associations. The findings reveal the long-run asymmetric and symmetric relationship of variables with the ecological footprint. The long-run empirical results of symmetric ARDL suggest that economic globalization and financial development increase footprint in Japan. On the flipside, the novel findings from the asymmetric ARDL indicate that positive and negative changes in economic globalization reduce footprint. Interestingly, the asymmetric ARDL presents a totally different picture, indicating that the results of symmetric ARDL can be unreliable in the presence of asymmetries. A positive change in financial development increases footprint with a more pronounced effect in the long-run, compared to a negative change which has a comparatively weak effect. Energy consumption deteriorates the environment by increasing the ecological footprint. On the positive side, population density decreases footprint, and the inverted U-shaped relationship between footprint and income confirms the validity of the EKC in Japan. Finally, the policy implications of these novel findings are discussed.