Assessing the palliative aspects of green innovations in the non-linear tendencies of environmental sustainability-financial globalization nexus among West African states

Abstract

A reconciliation of the disagreement on whether financial globalization (FG) affects ecological footprint through the scale, technique and composition effects cannot be achieved without an explicit understanding of the direct and indirect interactions of FG with environmental sustainability. Hence, the novel perspective of this study lies in the investigation of how green innovations moderate the non-linear tendencies in the FG-environmental sustainability link among western African states given the abundance of natural resources and the prevailing pace of economic growth. The core findings are obtained from robust analysis based on cross-sectional autoregressive distributed lag (CS-ARDL) technique, the augmented mean group (AMG) technique, and the common correlated effects mean group (CCEMG) advanced estimators. Firstly, the beneficial ecological impacts of green innovations were observed. As per direct impact, enhanced financial globalization (FG) exhibits non-linear detrimental ecological effects. However, green innovations cushion the observed adverse ecological effects of FG. Furthermore, resource rents reduce ecological footprint within the moderating framework of green innovation as the environmental Kuznets curve (EKC) is validated among the states. Additionally, a bidirectional causal link between financial globalization, green innovations, economic growth, natural resources, and ecological footprint was observed. Thus, the significant policy implication is for the West African states to decisively increase their investments in green innovations while strategically encouraging the share of ecologically friendly resources in total resource utilization to guarantee a more sustainable environment.