Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches
Fiscal policy is a crucial government tool for influencing and managing the national economy and creating a strong incentive for low carbon investment. Previous literature has reputable evidence that improving fiscal policy enhances environmental quality. However, the literature fails to classify th...
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| Format: | Article |
| Language: | English |
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MDPI AG
2021-10-01
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| Series: | Energies |
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| Online Access: | https://www.mdpi.com/1996-1073/14/21/6968 |
| _version_ | 1797512623786295296 |
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| author | Mustafa Kamal Muhammad Usman Atif Jahanger Daniel Balsalobre-Lorente |
| author_facet | Mustafa Kamal Muhammad Usman Atif Jahanger Daniel Balsalobre-Lorente |
| author_sort | Mustafa Kamal |
| collection | DOAJ |
| description | Fiscal policy is a crucial government tool for influencing and managing the national economy and creating a strong incentive for low carbon investment. Previous literature has reputable evidence that improving fiscal policy enhances environmental quality. However, the literature fails to classify the exact turning level (threshold point) below/above which the association may be negative or positive. In this regard, this research investigates the nexus between fiscal policy, foreign direct investment, financial development, trade openness, urban population, gross capital formation, labour force, and CO<sub>2</sub> emissions in the era of globalization. The panel data set contained 105 countries over the period from 1990 to 2016. The empirical findings are estimated through linear and nonlinear panel data approaches such as fully modified ordinary least square and panel threshold regression. The subsequent findings are established: first, fiscal policy and globalization significantly increase environmental pollution. Second, the empirical results confirm the existence of the pollution haven hypothesis (PHV). Third, financial development and gross fixed capital formation are also considered some of the most crucial indicators to increase pollution levels. Fourth, trade openness, urban population, and labour force improve environmental quality. Fifth, panel threshold regression discovers that countries maintain a minimum level of fiscal policy at −1.2889. Based on these empirical findings, this study suggests that policymakers and governments of these countries should take steps to restructure their industrial sector and design macroeconomic-level carbon-free policies to support the implementation of low-energy-intensive and lower carbon production technologies. |
| first_indexed | 2024-03-10T06:03:25Z |
| format | Article |
| id | doaj.art-31236ea115d34e788eaa05ae2e55565a |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-03-10T06:03:25Z |
| publishDate | 2021-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-31236ea115d34e788eaa05ae2e55565a2023-11-22T20:41:37ZengMDPI AGEnergies1996-10732021-10-011421696810.3390/en14216968Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data ApproachesMustafa Kamal0Muhammad Usman1Atif Jahanger2Daniel Balsalobre-Lorente3Department of Basic Sciences, College of Science and Theoretical Studies, Saudi Electronic University, Dammam 31454, Saudi ArabiaInstitute for Region and Urban-Rural Development, Wuhan University, Wuhan 430072, ChinaSchool of Economics, Hainan University, Haikou 570228, ChinaDepartment of Political Economy and Public Finance, Economics and Business Statistics and Economic Policy, University of Castilla-La Mancha, 16002 Cuenca, SpainFiscal policy is a crucial government tool for influencing and managing the national economy and creating a strong incentive for low carbon investment. Previous literature has reputable evidence that improving fiscal policy enhances environmental quality. However, the literature fails to classify the exact turning level (threshold point) below/above which the association may be negative or positive. In this regard, this research investigates the nexus between fiscal policy, foreign direct investment, financial development, trade openness, urban population, gross capital formation, labour force, and CO<sub>2</sub> emissions in the era of globalization. The panel data set contained 105 countries over the period from 1990 to 2016. The empirical findings are estimated through linear and nonlinear panel data approaches such as fully modified ordinary least square and panel threshold regression. The subsequent findings are established: first, fiscal policy and globalization significantly increase environmental pollution. Second, the empirical results confirm the existence of the pollution haven hypothesis (PHV). Third, financial development and gross fixed capital formation are also considered some of the most crucial indicators to increase pollution levels. Fourth, trade openness, urban population, and labour force improve environmental quality. Fifth, panel threshold regression discovers that countries maintain a minimum level of fiscal policy at −1.2889. Based on these empirical findings, this study suggests that policymakers and governments of these countries should take steps to restructure their industrial sector and design macroeconomic-level carbon-free policies to support the implementation of low-energy-intensive and lower carbon production technologies.https://www.mdpi.com/1996-1073/14/21/6968CO<sub>2</sub> emissionglobalizationfiscal policypollution haven hypothesispanel threshold model |
| spellingShingle | Mustafa Kamal Muhammad Usman Atif Jahanger Daniel Balsalobre-Lorente Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches Energies CO<sub>2</sub> emission globalization fiscal policy pollution haven hypothesis panel threshold model |
| title | Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches |
| title_full | Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches |
| title_fullStr | Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches |
| title_full_unstemmed | Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches |
| title_short | Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches |
| title_sort | revisiting the role of fiscal policy financial development and foreign direct investment in reducing environmental pollution during globalization mode evidence from linear and nonlinear panel data approaches |
| topic | CO<sub>2</sub> emission globalization fiscal policy pollution haven hypothesis panel threshold model |
| url | https://www.mdpi.com/1996-1073/14/21/6968 |
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