Financial Development and Sustainable Competitiveness in Arctic Region: A Dynamic Panel Data Analysis

Farzan Yahya


Institute of Southern Punjab, Department of Business Administration, Multan, Pakistan (Pakistan)
https://orcid.org/0000-0001-5666-1279

Ghulam Abbas


IBA Sukkur University, Department of Business Administration, Pakistan (Pakistan)

Muhammad Hussain


Institute of Southern Punjab, Department of Business Administration, Multan, Pakistan (Pakistan)

Muhammad Waqas

mwaqas@mail.ustc.edu.cn
Department of Business Administration, Institute of Southern Punjab, Multan, Pakistan (Pakistan)
https://orcid.org/0000-0003-4098-5994

Abstract

The present study investigates the effect of financial development on sustainable competitiveness and its components (natural capital, resource intensity, and social cohesion) in the Arctic region. We employ bank-based, stock-market based, and composite index to measure financial development. To deal with endogeneity bias, system GMM is utilized. The results show a positive and significant effect of financial development on sustainable competitiveness. The estimates also assert that financial development encourages resource efficiency and social cohesion in the region. In contrast, we find the negative effect of financial development on natural capital. This suggests that overexploitation of natural resources may provide short-term benefits to the local and regional communities but it may threaten the long-term sustainability of the Arctic. Thus, the financial sector should be guided to support financing and investing activities in alternative eco-friendly technologies and ventures for reducing excessive natural resource utilization.


Keywords:

sustainable competitiveness, financial development, social cohesion, resource intensity, natural capital

AL-MULALI U., OZTURK I., LEAN H.H., 2015, The influence of economic growth, urbanization, trade openness, financial development, and renewable energy on pollution in Europe, Natural Hazards, 79(1): 621-644.
DOI: https://doi.org/10.1007/s11069-015-1865-9   Google Scholar

AL MAMUN M., SOHAG K., SHAHBAZ M., HAMMOUDEH S., 2018, Financial markets, innovations and cleaner energy production in OECD countries, Energy Economics, 72: 236-254.
DOI: https://doi.org/10.1016/j.eneco.2018.04.011   Google Scholar

ANDERSON T.W., HSIAO C., 1981, Estimation of dynamic models with error components, Journal of the American statistical Association, 76(375): 598-606.
DOI: https://doi.org/10.1080/01621459.1981.10477691   Google Scholar

ANSER M.K., KHAN M.A., ZAMAN K., NASSANI A.A., ASKAR S.E., ABRO M.M.Q., KABBANI A., 2021, Financial development during COVID-19 pandemic: the role of coronavirus testing and functional labs, Financial Innovation, 7(1): 1-13.
DOI: https://doi.org/10.1186/s40854-021-00226-4   Google Scholar

APERGIS N., OZTURK I., 2015, Testing environmental Kuznets curve hypothesis in Asian countries, Ecological Indicators, 52: 16-22.
DOI: https://doi.org/10.1016/j.ecolind.2014.11.026   Google Scholar

ARELLANO M., BOVER O., 1995, Another look at the instrumental variable estimation of errorcomponents models, Journal of Econometrics, 68(1): 29-51.
DOI: https://doi.org/10.1016/0304-4076(94)01642-D   Google Scholar

ASIF M., KHAN K.B., ANSER M.K., NASSANI A.A., ABRO M.M.Q., ZAMAN K., 2020, Dynamic interaction between financial development and natural resources: Evaluating the ‘Resource curse’hypothesis, Resources Policy, 65: 101566.
DOI: https://doi.org/10.1016/j.resourpol.2019.101566   Google Scholar

BANDURA W.N., 2020, Inflation and FinanceGrowth Nexus in Sub-Saharan Africa, Journal of African Business: 1-13.
  Google Scholar

BARBIER E.B., BURGESS J.C., 2020. Sustainability and development after COVID-19, World Development, 135, 105082.
DOI: https://doi.org/10.1016/j.worlddev.2020.105082   Google Scholar

BASU D., 2020, Bias of ols estimators due to exclusion of relevant variables and inclusion of irrelevant variables, Oxford Bulletin of Economics and Statistics, 82(1): 209-234.
DOI: https://doi.org/10.1111/obes.12322   Google Scholar

BECKER M.S., POLLARD W.H. 2016). Sixty‐year legacy of human impacts on a high Arctic ecosystem, Journal of Applied Ecology, 53(3), 876-884.
DOI: https://doi.org/10.1111/1365-2664.12603   Google Scholar

BIRD R., DAVIS-NOZEMACK K., 2018, Tax avoidance as a sustainability problem, Journal of business ethics, 151(4): 1009-1025.
DOI: https://doi.org/10.1007/s10551-016-3162-2   Google Scholar

BLUNDELL R. BOND S., 1998, Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.
DOI: https://doi.org/10.1016/S0304-4076(98)00009-8   Google Scholar

BUSCH T., BAUER R., ORLITZKY M., 2016, Sustainable development and financial markets: Old paths and new avenues, Business & Society, 55(3): 303-329.
DOI: https://doi.org/10.1177/0007650315570701   Google Scholar

CARSON R.T., 2010, The environmental Kuznets curve: seeking empirical regularity and theoretical structure, Review of environmental Economics and Policy, 4(1): 3-23.
DOI: https://doi.org/10.1093/reep/rep021   Google Scholar

CHIRESHE J., OCRAN M.K., 2020, Financial development and health care expenditure in Sub Saharan Africa Countries, Cogent Economics & Finance, 8(1): 1771878.
DOI: https://doi.org/10.1080/23322039.2020.1771878   Google Scholar

D’AGOSTINO G., DUNNE J.P., PIERONI L., 2019, Military expenditure, endogeneity and economic growth, Defence and Peace Economics, 30(5): 509-524.
DOI: https://doi.org/10.1080/10242694.2017.1422314   Google Scholar

DASGUPTA S., LAPLANTE B., MAMINGI N., 2001, Pollution and capital markets in developing countries, Journal of Environmental Economics and management, 42(3): 310-335.
DOI: https://doi.org/10.1006/jeem.2000.1161   Google Scholar

DAUVERGNE P., 2010, The shadows of consumption: Consequences for the global environment: MIT Press.
  Google Scholar

DU L., WEI C., CAI S., 2012, Economic development and carbon dioxide emissions in China: Provincial panel data analysis, China Economic Review, 23(2): 371-384.
DOI: https://doi.org/10.1016/j.chieco.2012.02.004   Google Scholar

DURUSU-CIFTCI D., ISPIR M.S., YETKINER H., 2017, Financial development and economic growth: Some theory and more evidence, Journal of Policy Modeling, 39(2), 290-306.
DOI: https://doi.org/10.1016/j.jpolmod.2016.08.001   Google Scholar

ELKHUIZEN L., HERMES N., JACOBS J., MEESTERS A., 2018, Financial development, financial liberalization and social capital, Applied Economics, 50(11): 1268-1288.
DOI: https://doi.org/10.1080/00036846.2017.1358446   Google Scholar

GANDA F., 2019, The environmental impacts of financial development in OECD countries: a panel GMM approach, Environmental science and pollution research, 26(7): 6758-6772.
DOI: https://doi.org/10.1007/s11356-019-04143-z   Google Scholar

GHARLEGHI B., JAHANSHAHI A.A., 2020, The way to sustainable development through income equality: The impact of trade liberalisation and financial development, Sustainable Development, 28(4): 990-1001.
DOI: https://doi.org/10.1002/sd.2051   Google Scholar

GOKMENOGLU K.K., TASPINAR N., RAHMAN M.M., 2021, Military expenditure, financial development and environmental degradation in Turkey: A comparison of CO2 emissions and ecological footprint, International Journal of Finance & Economics, 26(1): 986-997.
DOI: https://doi.org/10.1002/ijfe.1831   Google Scholar

GOUGH I., 2017, Heat, greed and human need: Climate change, capitalism and sustainable wellbeing, Edward Elgar Publishing.
DOI: https://doi.org/10.4337/9781785365119   Google Scholar

GUISO L., SAPIENZA P., ZINGALES L., 2004, The role of social capital in financial development, American Economic Review, 94(3), 526-556.
DOI: https://doi.org/10.1257/0002828041464498   Google Scholar

HAIDER S., ADIL M.H., 2019, Does financial development and trade openness enhance industrial energy consumption? A sustainable developmental perspective, Management of Environmental Quality: An International Journal, 30(6): 1297-1313.
DOI: https://doi.org/10.1108/MEQ-03-2019-0060   Google Scholar

HAKOVIRTA M., DENUWARA N., 2020, How COVID-19 redefines the concept of sustainability Multidisciplinary Digital Publishing Institute.
DOI: https://doi.org/10.3390/su12093727   Google Scholar

HSUEH S.J., HU Y.H., TU C.H., 2013, Economic growth and financial development in Asian countries: a bootstrap panel Granger causality analysis, Economic Modelling, 32: 294-301.
DOI: https://doi.org/10.1016/j.econmod.2013.02.027   Google Scholar

HUCHET‐BOURDON M., LE MOUËL C., VIJIL M., 2018, The relationship between trade openness and economic growth: Some new insights on the openness measurement issue, The World Economy, 41(1): 59-76.
DOI: https://doi.org/10.1111/twec.12586   Google Scholar

JEBLI M. B., YOUSSEF S. B., OZTURK I., 2016, Testing environmental Kuznets curve hypothesis: The role of renewable and non-renewable energy consumption and trade in OECD countries, Ecological Indicators, 60: 824-831.
DOI: https://doi.org/10.1016/j.ecolind.2015.08.031   Google Scholar

KHAN Z., HUSSAIN M., SHAHBAZ M., YANG S., JIAO Z., 2020, Natural resource abundance, technological innovation, and human capital nexus with financial development: a case study of China, Resources Policy, 65: 101585.
DOI: https://doi.org/10.1016/j.resourpol.2020.101585   Google Scholar

LAN J., MALIK A., LENZEN M., MCBAIN D., KANEMOTO, K., 2016, A structural decomposition analysis of global energy footprints, Applied Energy, 163: 436-451.
DOI: https://doi.org/10.1016/j.apenergy.2015.10.178   Google Scholar

LEE J.M., CHEN K.H., CHO C.H., 2015, The relationship between CO2 emissions and financial development: evidence from OECD countries, The Singapore Economic Review, 60(5): 1550117.
DOI: https://doi.org/10.1142/S0217590815501179   Google Scholar

LEVIN A., LIN C.F., CHU C.S.J., 2002, Unit root tests in panel data: asymptotic and finite-sample properties, Journal of Econometrics, 108(1): 1-24.
DOI: https://doi.org/10.1016/S0304-4076(01)00098-7   Google Scholar

MANZANO O., GUTIÉRREZ J.D., 2019, The subnational resource curse: theory and evidence, The Extractive Industries and Society, 6(2): 261-266.
DOI: https://doi.org/10.1016/j.exis.2019.03.010   Google Scholar

MIKKELSEN A., LANGHELLE O., 2008, Arctic oil and gas: sustainability at risk?, Routledge.
DOI: https://doi.org/10.4324/9780203893746   Google Scholar

MUKHTAROV S., HUMBATOVA S., SEYFULLAYEV I., KALBIYEV Y., 2020, The effect of financial development on energy consumption in the case of Kazakhstan, Journal of
DOI: https://doi.org/10.1080/15140326.2019.1709690   Google Scholar

Applied Economics, 23(1): 75-88.
  Google Scholar

NTOW-GYAMFI M., BOKPIN G.A., ABOAGYE A.Q., ACKAH C.G., 2020, Environmental sustainability and financial development in Africa; does institutional quality play any role?, Development Studies Research, 7(1), 93-118.
DOI: https://doi.org/10.1080/21665095.2020.1798261   Google Scholar

PAUN C.V., MUSETESCU R.C. TOPAN V.M., DANULETIU D.C., 2019, The impact of financial sector development and sophistication on sustainable economic growth, Sustainability, 11(6): 1713.
DOI: https://doi.org/10.3390/su11061713   Google Scholar

QI D., CHEN L., CHEN B., GAO Z., ZHONG W., FEELY R.A., CHEN M., 2017, Increase in acidifying water in the western Arctic Ocean, Nature Climate Change, 7(3): 195-199.
DOI: https://doi.org/10.1038/nclimate3228   Google Scholar

QUITORAS M.R., CAMPANA P. E., CRAWFORD C., 2020, Exploring electricity generation alternatives for Canadian Arctic communities using a multiobjective genetic algorithm approach, Energy Conversion and Management, 210: 112471.
DOI: https://doi.org/10.1016/j.enconman.2020.112471   Google Scholar

RAZA S.A., SHAHBAZ M., PARAMATI S.R., 2017, Dynamics of military expenditure and income inequality in Pakistan, Social Indicators Research, 131(3): 1035-1055.
DOI: https://doi.org/10.1007/s11205-016-1284-7   Google Scholar

SADORSKY P., 2010, The impact of financial development on energy consumption in emerging economies, Energy policy, 38(5): 2528-2535.
DOI: https://doi.org/10.1016/j.enpol.2009.12.048   Google Scholar

SCHELLNHUBER H. J., HARE W., SERDECZNY O., ADAMS S., COUMOU D., FRIELER K., ROBINSON A., 2012, Turn down the heat: why a 4 C warmer world must be avoided, http://documents.worldbank.org/curated/en/865571468149107611/Turn-down-the-heat-why-a-4-C-warmer-world-mustbe-avoided.
  Google Scholar

SHAHBAZ M., MALLICK H., MAHALIK M. K., LOGANATHAN N., 2015, Does globalization impede environmental quality in India?, Ecological Indicators, 52: 379-393.
DOI: https://doi.org/10.1016/j.ecolind.2014.12.025   Google Scholar

SHAHBAZ M., SHAHZAD S.J.H., AHMAD N., ALAM, S., 2016, Financial development and environmental quality: The way forward, Energy policy, 98: 353-364.
DOI: https://doi.org/10.1016/j.enpol.2016.09.002   Google Scholar

TAKUMAH W., IYKE B.N., 2017, The links between economic growth and tax revenue in Ghana: an empirical investigation, International Journal of Sustainable Economy, 9(1): 34-55.
DOI: https://doi.org/10.1504/IJSE.2017.10001606   Google Scholar

TAMAZIAN A., CHOUSA J.P., VADLAMANNATI K.C., 2009, Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries, Energy policy, 37(1): 246-253.
DOI: https://doi.org/10.1016/j.enpol.2008.08.025   Google Scholar

TAMAZIAN A., RAO B.B., 2010, Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies, Energy Economics, 32(1): 137-145.
DOI: https://doi.org/10.1016/j.eneco.2009.04.004   Google Scholar

THORE S., TARVERDYAN R., 2016, The sustainable competitiveness of nations. Technological Forecasting and Social Change, 106: 108-114.
DOI: https://doi.org/10.1016/j.techfore.2016.02.017   Google Scholar

TRUMP B.D., KADENIC, M., LINKOV I., 2018, A sustainable Arctic: Making hard decisions, Arctic, Antarctic, and Alpine Research, 50(1): e1438345.
DOI: https://doi.org/10.1080/15230430.2018.1438345   Google Scholar

XU L., TAN J., 2020, Financial development, industrial structure and natural resource utilization efficiency in China, Resources Policy, 66: 101642.
DOI: https://doi.org/10.1016/j.resourpol.2020.101642   Google Scholar

YAHYA F., RAFIQ M., 2019, Unraveling the contemporary drivers of renewable energy consumption: Evidence from regime types, Environmental Progress & Sustainable Energy, 38(5): 13178.
DOI: https://doi.org/10.1002/ep.13178   Google Scholar

YAHYA F., RAFIQ M., 2020, Brownfield, greenfield, and renewable energy consumption: Moderating role of effective governance, Energy & Environment, 31(3): 405-423.
DOI: https://doi.org/10.1177/0958305X19872936   Google Scholar

YAHYA F., SHAOHUA Z., ABBAS U., WAQAS M., 2021, COVID-19-induced Returns, Attention, Sentiments and Social Isolation: Evidence from Dynamic Panel Model, Global Business Review, 0972150921996174.
DOI: https://doi.org/10.1177/0972150921996174   Google Scholar

ZAFAR M.W., SAUD S., HOU F., 2019, The impact of globalization and financial development on environmental quality: evidence from selected countries in the Organization for Economic Cooperation and Development (OECD), Environmental science and pollution research, 26(13): 13246-13262.
DOI: https://doi.org/10.1007/s11356-019-04761-7   Google Scholar

ZAIDI S.A.H., WEI Z., GEDIKLI A., ZAFAR M.W., HOU F., IFTIKHAR Y., 2019, The impact of globalization, natural resources abundance, and human capital on financial development: Evidence from thirty-one OECD countries, Resources Policy, 64: 101476.
DOI: https://doi.org/10.1016/j.resourpol.2019.101476   Google Scholar

ZAIDI S.A.H., ZAFAR M.W., SHAHBAZ M., HOU F., 2019, Dynamic linkages between globalization, financial development and carbon emissions: Evidence from Asia Pacific Economic Cooperation countries, Journal of Cleaner Production, 228: 533-543.
DOI: https://doi.org/10.1016/j.jclepro.2019.04.210   Google Scholar

ZAMEER H., WANG Y., YASMEEN H., 2020, Reinforcing green competitive advantage through green production, creativity and green brand image: implications for cleaner production in China, Journal of Cleaner Production, 247: 119119.
DOI: https://doi.org/10.1016/j.jclepro.2019.119119   Google Scholar

ZHANG Y.J., 2011, The impact of financial development on carbon emissions: An empirical analysis in China, Energy policy, 39(4): 2197-2203.
DOI: https://doi.org/10.1016/j.enpol.2011.02.026   Google Scholar

Download


Published
2022-01-03

Cited by

Yahya, F., Abbas, G., Hussain, M., & Waqas, M. (2022). Financial Development and Sustainable Competitiveness in Arctic Region: A Dynamic Panel Data Analysis. Problemy Ekorozwoju, 17(1), 267–278. https://doi.org/10.35784/pe.2022.1.24

Authors

Farzan Yahya 

Institute of Southern Punjab, Department of Business Administration, Multan, Pakistan Pakistan
https://orcid.org/0000-0001-5666-1279

Authors

Ghulam Abbas 

IBA Sukkur University, Department of Business Administration, Pakistan Pakistan

Authors

Muhammad Hussain 

Institute of Southern Punjab, Department of Business Administration, Multan, Pakistan Pakistan

Authors

Muhammad Waqas 
mwaqas@mail.ustc.edu.cn
Department of Business Administration, Institute of Southern Punjab, Multan, Pakistan Pakistan
https://orcid.org/0000-0003-4098-5994

Statistics

Abstract views: 106
PDF downloads: 40