Does economic globalization have predictive power for ecological footprint in MENA counties? A panel causality test with a Fourier function

Abstract

Recently, there has been renewed interest in the relationship between economic globalization and environmental pollution since various globalization indices are developed. Although several attempts have been made to investigate the impact of globalization on the environment, no known empirical research has focused on exploring the causal relationship between ecological footprint and economic globalization index (provided by KOF Swiss Economic Institute) considering also its subcomponents-trade and financial globalization indices. In this study, a new panel data technique for the causality analysis is developed (namely, panel Fourier Toda-Yamamoto approach) and applied to ecological footprint-economic globalization nexus in 14 MENA (Middle East and North Africa) countries during the period 1981-2016. The empirical results highlight that ecological footprint Granger causes economic, trade, and financial globalization for the panel. Besides, it is found that financial globalization has a predictive power to predict further values of environmental degradation in the MENA countries. The empirical results of this paper have a number of practical implications for policymakers. Especially, policymakers should be careful about implementing environmental policies since they may affect economic (trade and financial) activities negatively.