Financing sustainable environment in the wake of global warming for E7 economies: heterogeneous analyses based on NARDL and quantile regression.

Financial development as a viable tool in nation-building and economic expansion is generally established in growth empirics. That notwithstanding, its roles in the drives towards environmental sustainability have received commending and reprimanding views in recent times. However, empirical study advancing the asymmetric effects of financial development from the broader view of measures seems limited and evolving. Hence, the present study investigates the positive and negative effects of financial development measured by broad money and domestic credit to the private sector on environmental sustainability (CO2 emissions and ecological footprint) in the Emerging Seven (E7) economies from 1995 to 2019. The empirical evidence considers the intervention of government policy through fiscal policy instruments (government spending and tax revenue), eco-digitalization, affluence, and population growth in a STIRPAT framework. The main analyses focus on advanced estimators such as pool mean group, mean group, dynamic fixed effects, and panel quantile regression. Feedback shows that negative shocks from financial development captured by broad money induce more surges in CO2 emissions. Similarly, the negative shocks from domestic credit to private sectors promote CO2 emissions, while the positive shocks moderate the emissions. The findings also uncover eco-digitalization as a viable tool to achieve environmental sustainability in the E7 economies. Furthermore, the measures of fiscal policy have differing impacts on environmental sustainability as evident from the positive and negative signs attributed to government expenditure and tax revenue. Moreover, affluence and population growth exacerbate CO2 emission surges. Policy insights that drive environmental sustainability are suggested based on the findings. [ABSTRACT FROM AUTHOR]