Financial Globalization, Environmental Degradation, and Energy Consumption in ASEAN: An Empirical Analysis

Abstract

This study investigates the intricate causal relationships among financial globalization uncertainty, environmental degradation, economic growth, and energy consumption in ASEAN countries. By employing a robust second-generation analytical approach, the research provides a comprehensive evaluation of these dynamics over the extensive period from 1970 to 2023. The analysis seeks to uncover how fluctuations in financial globalization influence environmental outcomes and economic performance, while also examining the pivotal role of energy consumption in these interconnected processes. This extended timeframe allows for a detailed exploration of long-term trends, offering valuable insights into policy implications for sustainable development and the management of globalization-related uncertainties in the ASEAN region. The findings reveal that both economic growth and environmental degradation exert a significant positive impact on energy consumption, highlighting their strong interconnection. In contrast, financial globalization uncertainty demonstrates an insignificant effect on energy consumption, suggesting that fluctuations in global financial integration do not substantially alter energy usage patterns within the observed framework. These results underscore the critical role of economic expansion and environmental factors in shaping energy demand, while also indicating that the influence of financial globalization uncertainty may be less direct or context-dependent. The analysis of causal relationships reveals the presence of a bidirectional causality between financial globalization uncertainty and energy consumption, indicating mutual influence between these variables. Similarly, a bidirectional causal relationship is observed between environmental degradation and energy consumption, as well as between economic growth and energy consumption. These findings suggest a dynamic interplay, where changes in one variable actively influence the other, emphasizing the interconnected nature of financial, environmental, and economic factors with energy consumption patterns. This bidirectional causality highlights the complexity of policy-making in achieving sustainable energy management and economic development.