The Influence of Financial Development on Ecological Footprint: A Panel Quantile Regression Modelling in OECD Countries

In the competitive landscape where Organisation for Economic Cooperation and Development (OECD) nations vie for investments and strive to maintain competitiveness, financial development, becomes a crucial factor not only in resource allocation but also in shaping the ecological footprint. The complex and varied nature of the relationship between financial development and ecological footprint in OECD nations may be oversimplified by conventional linear regression models. This study aims to model the effects of financial development on the ecological footprint of OECD countries using panel quantile regression. Analysing a sample of 36 countries within the OECD from 1995 to 2021 using a panel quantile regression framework with distributional heterogeneity, the study reveals a U-shape relationship between financial development and ecological footprint when the countries with high ecological footprint. Policymakers may promote eco-friendly financial practices, integrate green finance principles, and develop policies to manage environmental consequences of financial development. The originality of this research is evident in highlighting that the influence of financial development on ecological footprint differs among countries, contingent on their specific ecological footprint levels. This is achieved through the application of a panel quantile regression approach, providing policymakers with valuable insights.