Green Finance and Ecological Footprint: Empirical Evidence from 13 Leading Countries in Green Financial Development

This study investigates the long-run relationship between green finance and the ecological footprint in 13 countries with the highest levels of green financial development, while also examining the roles of green growth, economic growth, financial globalization, and capital formation. Using panel data from 1994 to 2020, the analysis applies advanced econometric techniques, including the Augmented Mean Group (AMG), Fully Modified Ordinary Least Squares (FMOLS), and Dynamic Ordinary Least Squares (DOLS) estimators to identify long-term effects. In addition, the Dumitrescu–Hurlin panel bootstrap causality test is used to explore the direction of relationships among variables. The results confirm the existence of cointegration among all variables. Green finance and green growth are found to reduce the ecological footprint, indicating their effectiveness in mitigating environmental degradation. In contrast, economic growth, financial globalization, and capital formation contribute positively to the ecological footprint, suggesting a link to increased environmental pressure. The causality analysis reveals a bidirectional relationship between green growth and ecological footprint, while green finance, economic growth, financial globalization, and capital are found to be causal factors of ecological footprint. The findings highlight the importance of promoting green finance and sustainable growth strategies while ensuring that financial and capital flows support environmental objectives.