Innovative Carbon Mitigation Techniques to Achieve Environmental Sustainability Agenda: Evidence from a Panel of 21 Selected R&D Economies

Technological innovation in the energy sector is highly needed to reduce carbon emission costs, which requires knowledge spillovers, financial development, and carbon pricing to achieve a green developmental agenda. The current study examines the role of knowledge innovations in achieving the environmental sustainability agenda under financial development and carbon pricing in a panel of 21 selected R&D economies from 1990 to 2018. The study constructed a composite index of financial development and knowledge innovation in the carbon pricing model. The results show that carbon pricing, a financial development index, innovation index, and energy demand fail to achieve stringent carbon reduction targets. A U-shaped relationship is found between carbon emissions and per capita income in the absence of a financial development index and trade openness. At the same time, this study shows the monotonic decreasing function in the presence of all factors. The causality estimates confirmed the feedback relationship between carbon pricing and carbon emissions, carbon pricing and the financial index, and the financial development index and innovation index. Further, the causality results established the carbon-led financial development and innovation, growth-led carbon emissions, and trade-led emissions, pricing, and financial development in a panel of selected countries. The estimates of the innovation accounting matrix (forecasting mechanism) confirmed the viability of the environmental sustainability agenda through carbon pricing, knowledge innovation, and financial development over a time horizon. However, these factors are not achievable carbon reduction targets in a given period. The study concludes that carbon pricing may provide a basis for achieving an environmental sustainability agenda through market-based innovations, green financing options, and improved energy resources. This would ultimately help desensitize carbon emissions across countries.

Pakistan's Growth Empirics and Foreign Direct Investment: An Assessment of the Role of Domestic Financial Sector

Purpose: This reseach endeavours to investigate the role of fiancial sector in determining the foreign direct inflows in pakistan. Design/Methodology/Approach: Autoregressive Distributed Lag Model is applied to conclude the nature of linear association among the variables, in this study, we have used time series data over the period 1980-2019 of Pakistan. A financial development index has been created to illustrate the financial development by using Principle Component Analysis (PCA). Robustness of the relation among variables is also checked, and incorporated this in the empirical model. Findings: The findings described very interesting implications, by exhibiting a positive association among FDI and economic growth in the presence of financial sector indicators. These conclusions hold notwithstanding in the presence or absence of Financial development Index. Therefore, the presence of strong financial sector is necessary to attract FDI and to smoothen the economic growth process.Implications/Originality/Value: The role of fiancial sector is indespensible in determining the economic activity. In addition to this, research at hand explore the inclusive nature of the relationships among foreign direct investment (FDI), Financial sector, and economic growth. It exhibits a reflection of the various sources of economic growth.

Financial Development, Financial Inclusion and Primary Energy Use: Evidence from the European Union Transition Economies

The main objective of the research is to analyze the impact of financial sector development indicators and financial institutions access on primary energy use based on a sample of European Union transition members over 20 years period (1996–2017) through panel cointegration and causality tests that allow for cross-section dependence. The causality analysis revealed that the direction of the causality among financial development indicators, financial institutions access, and primary energy use varied among the countries. On the other side, panel cointegration coefficients disclosed that the financial development index positively affected the primary energy use, but private credit did not have a significant effect on the primary energy use. Furthermore, financial institutions’ access had a significant negative impact on primary energy use. However, country-level cointegration coefficients indicated that the financial development index positively affected the primary energy use in Bulgaria, Croatia, Czechia, Hungary, and Slovenia, and private credit also had a positive impact on primary energy use in Bulgaria, Czechia, Estonia, Hungary, Lithuania, Poland, and Slovakia, but the effect of financial development index on primary energy use was found to be very higher than that of private credit. Moreover, financial institutions’ access negatively affected the primary energy use in Croatia, Estonia, Hungary, Poland, and Romania.

Measuring national financial development: indexes and methods

Financial development of a country is a broad concept and can be measured in different ways. The article presents the indicators of financial development applicable for the development of the Financial Development Index (FDI) of a particular country. Financial development index could be used to rank and compare the level of financial development among countries or to test the relationship between financial development and economic growth. The paper points out the advantages and limitations of several methods including standardized method, Principle Component Analysis (PCA) method, Data Envelopment Analysis (DEA) method. The author also suggests to use Data Envelopment Analysis as an updated and advanced method to construct Financial Development Index. It is expected that this method will strengthen the quantitative approach in the research of financial development and economic growth.

International Finance Trilemma as a Tool for Balanced Development of an Economy

International financial trilemma is a challenge of balancing the governmental policies ensuring healthy financial sector for facilitating economic development of a country. The scientific purpose of the paper is to develop a model of the international financial trilemma, defining the three key pillars of the international financial trilemma, the corresponding relevant metrics of economy, as well as describing expansion of financial technology as a disruptive element on a trilemma balance. Taking into account the experience of other researches of trilemma concept, analogically to the Energy Trilemma index, the authors developed the trilemma concept for the financial sector. The paper proposes determining the Financial trilemma index basing it on the following pillars: financial stability, financial inclusion and transparency. The authors analyse FinTech services as disruptive element affecting the International Financial trilemma index. As statistical basis of the financial trilemma and its building blocks the set of data from publicly available databases, such as the Global Competitiveness index, the Financial Development index, Global Findex and Doing Business is determined. The generally accepted quantitative and qualitative methods of economic science, inter alia comparative analysis, parameter estimation, grouping, economically mathematical modelling, synthesis, inductive, deductive and logically constructive methods have been used for the research. The financial trilemma index could be used as a tool for modelling an impact assessment of planned policy actions, as well as for developing determined steps for rising values of particular trilemma elements.

Linkage between Financial Development and Income Inequality in India

A sound financial system is a prerequisite for the inclusive and stable development of an economy, especially it plays a key role in dealing with the menace of inequality in income distribution. Economic policies including monetary and fiscal policy framed by the policymakers influence the accessibility to the financial resources by the poor. This study intends to examine the relationship between financial development and income inequality in India over the period 1973 to 2015. To analyze this relationship, the financial development index was constructed using the PCA approach. The study also checks the presence of the Greenwood–Jovanovich (GJ) hypothesis in the Indian economy. In this study, the ARDL Bound testing procedure is followed to assess the impact of financial development on income inequality. Besides financial development, the impact of economic development and government expenditure is also observed. Results confirm the existence of an inverted U-shaped linkage between financial development and income inequality in India, whereas economic development deteriorates the gap between the income of poor and rich. Furthermore, a U-shaped relationship between government expenditure and income inequality is revealed in this study. The findings of this study may provide new insight to the policymakers for framing suitable economic policies to encourage sustainable development in India.

The Relationship Between Human Capital and Financial Development: A Case Study of Turkey

The current growth literature has focused on the contribution of the human and financial variables to growth. This has led to an insufficient and low number of studies investigating the relationship between the financial and human variables. However, in order to establish effective public policies, the correlation between these two variables must be well known. In line with this necessity, this study aimed to contribute the relevant literature by investigating the relations of the two variables in the case of Turkey. To do so, firstly, the human and financial development index for Turkey was established. Subsequently, the financial development indicator was measured through the M2/GDP ratio, and the human capital indicator was measured through the education and health expenditures/GDP ratio. Through the econometric analysis carried out using the data from the period of 1998-2016, the existence of causality and the direction of this causality between the financial development and human capital accumulation in Turkey were investigated. As a result, it was observed that in Turkey, while financial development causes the accumulation of human capital, there is no significant causality directed from human capital to financial development.

The impact of ICT on financial development: Empirical evidence from the Gulf Cooperation Council countries

The globalization revolution has led to many countries considering advancing technology, which has led to electronic finance becoming an important aspect in all economic and financial sectors. This study aims to investigate the impact of information and communication technology (ICT) on the financial development index of six Gulf Cooperation Council (GCC) countries from the period 2000 to 2016. The results are reported in terms of two main ICT variables: fixed broadband and Internet users as a proxy of ICT and domestic credit to private sector as a percentage of gross domestic product (GDP) and broad money supply/GDP as two proxies of the financial development index. This methodology used fixed effects (FEs) estimations, and the results show that an increase in fixed broadband has a statistically significant and positive effect on both proxies of financial development. In terms of domestic credit as a percentage of the GDP proxy, the positive effects of ICT (broadband) are greater than the one from Internet users. A 1% increase in fixed broadband leads to approximately 2% increase in financial development, but the Internet user variable resulted in about a 0.09% increase. The other money supply proxy increased by 0.40% when ICT increased by 1%. Additionally, money supply increased by 0.11% when the Internet user ratio increased by 1% .To control for the endogeneity problem, the study used a generalized method of moments estimator, and the results confirm the previous results of the FE. Moreover, the negative impact of economic growth and natural resources was found to be valid and significant, while urbanization and trade openness were found to significantly and positively affect both financial development proxies. The main conclusion of the study is that GCC countries should take action in building an effective joint information system to help construct efficient economic sectors.