G7 Economies Research Articles

Oil Price Uncertainty and Consumer Sentiment in Advanced Economies

How does oil price uncertainty affect consumer sentiment in advanced economies? Is the response of consumer sentiment to exogenous positive and negative oil price shocks symmetric or asymmetric? Motivated to answer these questions, this paper provides a comprehensive examination of the effects of real oil price shocks on consumer sentiment in the G7 economies in the context of two classes of empirical models. With the application of a bivariate structural GARCH-in-Mean VAR model we find that (in general) oil price uncertainty has a negative and statistically significant effect on consumer sentiment in the G7 countries. Moreover, using a test of symmetry, we find that the relationship between oil prices and consumer sentiment is in general asymmetric. JEL Classification: C32, D12, Q43, O57

Navigating energy policy uncertainty: Effects on fossil fuel and renewable energy consumption in G7 economies

ABSTRACT In an era where energy transitions are critical for addressing climate change and ensuring economic stability, energy policy uncertainty (EGU) emerges as a crucial factor influencing energy consumption patterns. This study investigates the complex relationship between EGU and various forms of energy consumption, including fossil fuels, renewables, and total energy use across G7 countries from 1996 to 2022. Utilizing FMOLS (fully modified OLS) and DOLS (dynamic ordinary OLS) models, long-term relationships among variables were established and robustness was checked by employing ARDL (autoregressive distributed lag) model. Our findings reveal that EGU significantly hampers fossil fuel consumption, impedes renewable energy uptake, and affects total energy consumption adversely. These effects underscore the broader implications of policy uncertainty on energy strategies. Specifically, the robustness checks confirm that these relationships hold across different model specifications and periods. In addition, analysis reveals the dynamic impact of control variables including FDI inflow, institutional quality, banking development, and inflation rates on specific energy consumptions. Policy implications are profound: governments must prioritize the stabilization of energy policies to enhance investor confidence and facilitate the transition to sustainable energy sources. Additionally, targeted interventions to mitigate uncertainty can promote the development of renewable energy infrastructure and support more predictable energy markets. This study provides new insights into the impacts of policy uncertainty on energy consumption and offers a foundation for strategic policy formulation aimed at achieving a balanced and sustainable energy future.

Inclusive finance and sustainability: The dynamic spillover effects of uncertainties on access to credit

A firm's access to domestic credit is crucial in inclusive finance for businesses, particularly small and medium-sized enterprises, to invest and grow. Sustainable and inclusive economic growth requires a healthy private sector with access to financial resources. This paper explores how uncertainty from major economies (measured by Uncertainty Spillover indices) can limit domestic credit availability in the private sector. Analysing a panel dataset encompassing 100 developed and developing economies from 1996 to 2019, the research reveals that uncertainties stemming from China and the United States significantly reduce the availability of domestic financial resources. Uncertainties surrounding other G7 economies (Canada, France, Germany, Italy, Japan, and the United Kingdom) also exhibit a negative association; however, their effects are statistically insignificant. The robustness of these findings is confirmed across various empirical models and income classifications. Possible implications for inclusive finance and sustainable economic growth are also discussed.

Debt Dynamics and Investment Patterns: Public Debt-Investment Nexus in G7 and ASEAN Economies

Debt Dynamics and Investment Patterns: Public Debt-Investment Nexus in G7 and ASEAN Economies

What drives natural capital in E7 and G7 economies? The roles of energy transition and urbanization

As the world progresses toward low-carbon technologies that rely primarily on minerals, there is a need for increased mining to solve environmental concerns in a manner that is both sustainable and climate-conscious. Given this background, this study examines the determinants of mineral exports (a measure of natural capital) in E7 and G7 economies from 1990 to 2019. Utilizing several different estimation techniques, the paper finds that country size (measured by gross domestic product) and de-urbanization decrease mineral exports in G7 economies. In contrast, the energy transition from non-renewable to renewable sources promotes mineral exports in the G7 countries. Regarding E7 economies, urbanization is negatively related to mineral exports but financial development and foreign direct investments promote mineral exports. Therefore, E7 and G7 economies should emphasize sustainable mining markets by considering different policy implications.

The impact of carbon risk on the cost of debt in the listed firms in G7 economies: The role of the Paris agreement

The Paris Agreement, signed in 2015, sets ambitious goals for diminishing greenhouse gas emissions and restricting the rise in global temperature to achieve a less carbon-intensive and climate-resilient global economy. The Paris Agreement marked a defining moment in the worldwide response to global warming and has significantly affected the financial sector. Given this background, this research explores the effects of carbon risk on the cost of debt (CoD) in 1428 listed firms across seven economies from 2011 to 2020. The paper also reflects the post-Paris Agreement's involvement and the ESG factors' moderating effect in the empirical models. The study finds a significant impact of carbon risk on CoD following the implementation of the Paris Agreement. Notably, companies with higher carbon risk face higher borrowing rates. However, the effect of ESG on moderating the relationship between carbon risk and CoD is found to be insignificant. Further analyses confirm this finding, as individual pillars of ESG (governance and social aspects) also show insignificant moderating effects.

A Bayesian vector-autoregressive application with time-varying parameters on the monetary shocks–production network nexus

ABSTRACT Transmission channels from monetary shocks might be identified by studying the features of the production network. The main aim of this paper is to provide insights about the role of production network into the propagation of monetary policy shocks in G7 economies. Time-varying Bayesian vector-autoregressions were built to compute impulse response functions of output to monetary policy shocks in these countries. Panel Auto-Regressive Distributed Lag Bound Approach based on Mean-Group estimator was used to assess the long and short-run connections between production network structure and various shocks associated to monetary policy in the period 2000–2018 and during the Great Recession (2007–2009). The results show that upstreamness is more significant than downstremness in the period 2000–2018, while the financial sector significantly contributed to the spread of various monetary shocks during the Great Recession.

How does economic policy uncertainty influence energy policy? The role of financial sector development

It is necessary to warrant the long-term viability of the energy policy for sustainable economic growth. However, certain factors exist that can create a threat to energy policy. In this essence, the current analysis explores the impact of EPU (economic policy uncertainty) and financial sector development on fossil fuel energy, renewable energy (REC), and total energy (EGY). The empirical analysis utilized the CS-ARDL model and focused on a sample comprising G7 economies. The robustness of analysis was examined by employing fully modified ordinary least square (FMOLS) technique. The estimated coefficients outline the significant negative impact of all main explanatory variables on fossil fuel energy and total energy and EGY in the long run and a significant negative impact on renewable energy in the short run. The findings further demonstrate the significant positive impact of financial development on fossil fuel energy and total energy and the significant negative relationship between financial development and renewable energy. Particularly, the analysis discloses the moderating role of financial development in the EPU-energy policy nexus. It is advised to policy officials that they should enhance the cooperation between the financial sector and the energy sector for the success of energy policy and for responding to the uncertain economic situation. This study robust the empirical findings of studies exploring the EPU-energy nexus and extends the literature by pointing out the moderating role of FCD.

Energy uncertainty, geopolitical conflict, and militarization matters for Renewable and non-renewable energy development: Perspectives from G7 economies

Conflict can increase the risk profile of fossil fuel-oriented projects due to disruptions in the energy supply chain and potentially impact the clean energy transition in G7 economies. Thus, the paper investigates the unexplored connections between energy uncertainty, geopolitical conflict, and the militarization index with renewable and non-renewable energy in G7 (1997–2022). The application of advanced econometric algorithms, notably the Methods of Moment Quantile Regression, reveals that energy uncertainty has a positive effect on renewable energy consumption and a negative effect on non-renewable energy consumption. Furthermore, the current geopolitical landscape poses unfavorable conditions for both the expansion of renewable energy usage and the utilization of non-renewable energy sources. The global militarism index relies on non-renewable rather than renewable energy sources. The study employed the Impulse Response Function using Bayesian vector autoregression. The study discovered that variations in energy uncertainty initially enhance the usage of renewable energy but ultimately have adverse consequences for renewable and non-renewable energy consumption. Geopolitical risk unfavorably affects both types of energy, but trade positively influences the growth of renewable energy use in G7. The study recommends transparent economic strategies as essential for governments to reduce uncertainty and facilitate a transition to clean energy.

Unraveling consumption‐based carbon dioxide emissions: Sectoral analysis and temporal dynamics in G7 economies

AbstractThis research investigates consumption‐based carbon dioxide emissions (CBE) within the Group of Seven (G7) economies from 1990 to 2022, particularly under the Paris Agreement. The main focus of the study is on key determinants such as trade, income, renewable energy consumption, foreign direct investment, and technological innovation. The study aims to unravel the complexities underlying the environmental footprint of consumption. A novel aspect of this research is its intent to fill existing gaps in the literature by providing a sectoral analysis and exploring the temporal dynamics of consumption patterns within these advanced industrial nations. Advanced econometric methods, specifically the Cross‐Section Augmented Autoregressive Distributed Lag (CS‐ARDL), are employed to enhance the robustness and reliability of the analysis. Cointegration relationships among CBE and its determinants shed light on the short and long‐term interdependencies among these factors. Using the Augmented Mean Group (AMG) and Common Correlated Effect Mean Group (CCEMG) methods to conduct robustness checks makes the models even more substantial and ensures the results' validity. The implications of this research are far‐reaching, extending to various stakeholders, including policymakers, businesses, industries, and supply chain decision makers. Our study identifies significant long‐term relationships between CBE and key determinants within G7 economies. The findings emphasize the urgency of adopting strategies that promote the sustainable management of natural resources. As global efforts intensify to address climate change, this research provides practical implications for shaping sustainable policy strategies and environmental initiatives on a global scale.

Role of natural resources, renewable energy sources, eco-innovation and carbon taxes in carbon neutrality: Evidence from G7 economies

Global warming has created problems for human life, and it has been increasing for a few years. All the developing and developed countries are establishing policies to attain zero carbon status. This study extends the ongoing debate on carbon emissions. It examines the effect of natural resources and RE (Biofuel and other renewable sources) on greenhouse gas (CO2 emission and PM2.5) emissions while using data over 22 years (1999–2021) from G7 countries. In addition, this study has investigated the effect of carbon taxes, financial development, and environmental policies on carbon neutrality. The cross-sectional-ARDL, the Common correlated effect means group (CCEMG), and the Augmented mean group (AMG) cutting-edge model have been employed. Quantile regression has been employed for robustness. The study results demonstrate that biofuel and other renewable energy (RE) sources, carbon taxes, environmental policy, and eco-innovation decrease greenhouse gas emissions (CO2 emissions). Meanwhile, financial development, and natural resource dependence positively impact carbon neutrality. The robustness result also verifies the findings from CS-ARDL, AMG, and CCEMG methods. The empirical findings are used to infer policy implications for G7 economies.

The impact of renewable energy on inflation in G7 economies: Evidence from artificial neural networks and machine learning methods

This paper examines the impact of cleaner energy adoption (i.e., renewable energy consumption and generation) on inflation rates in G7 economies from 1997 to 2021. The Principal Component Analysis is used to construct the renewable energy consumption and generation indices. Then, the paper runs various artificial neural networks and machine learning methods to test the validity of the cleaner energy-led inflationary economy hypothesis. It is observed that renewable energy consumption and production significantly predict inflation rates along with macroeconomic variables. The effects of renewable energy consumption and production on inflation rates are positive. Related policy implications are also discussed.

A simultaneous impact of digital economy, environment technology, business activity on environment and economic growth in G7: Moderating role of institutions

This study investigates the simultaneous influence of the digital economy, environmental technologies, business activity, and institutional quality on both the environment and economic growth in G7 economies from 1996 to 2020. The study provides an in-depth analysis to investigate the influence of institutional quality, particularly the regulatory environment, on business activity. Employing a rigorous methodology encompassing correlation analysis, long-term examination using Driscoll and regression estimators, and the utilization of various digital economy indicators such as internet usage and cell subscriptions, we uncover significant insights. The findings underscore the substantial impact of digital economies in mitigating carbon emissions and driving economic growth at an accelerated rate. Moreover, the study reveals that certain regulatory constraints on corporate operations can paradoxically facilitate carbon emission management while also fostering economic expansion. The study validates the presence of an inverted U-shaped Environmental Kuznets Curve (EKC) in G7 economies. This suggests that there is a specific point at which economic activities start to contribute more to carbon emissions. Moreover, the study highlights the importance of achieving a balance between economic growth driven by foreign direct investment and the goals of environmental sustainability. Environmental technology is becoming increasingly important in the regulation of emissions. Significantly, the study highlights the need to enhance the quality of implementing institutional regulations. It suggests that G7 economies can improve both environmental quality and economic growth by adopting superior regulatory methods. These findings are relevant for governments seeking economic growth and environmental protection. They suggest the need for specific policy actions to accomplish sustainable development goals.

The impact of cleaner energy sources, advanced technology firms, and economic expansion on ecological footprints is critical in sustainable development

The environmental degradation accompanying economic growth, despite the potential mitigating effects of technological advancements and cleaner energy sources. This study examines the critical impact of cleaner energy sources, advanced technology firms, and economic expansion on ecological footprints within the context of sustainable development, focusing on the period between 2010 and 2022. By comparing the E7 (emerging seven) and G7 (Group of Seven) economies, the research aims to delineate how these factors collectively influence environmental sustainability in both developing and developed nations. Utilizing a robust panel estimation technique, the study systematically explores the relationship between the adoption of renewable energy technologies, the growth of high-tech industries, and macroeconomic expansion, alongside their respective effects on the ecological footprint, a key indicator of environmental impact. Our statistical analysis reveals significant differences between the E7 and G7 countries. For the G7, investments in cleaner energy and technology sectors have shown a more pronounced effect in reducing ecological footprints, attributed to higher efficiency standards and greater public awareness. In contrast, the E7 countries exhibit a delayed response, owing to varying stages of economic development and technological adoption, although promising trends are emerging. Notably, the G7 demonstrates a more pronounced inclination towards financial imperialism (0.043), while the E7 is significantly influenced by green energy sources (0.258). Policy implications drawn from the findings suggest that targeted investments in green technologies and renewable energy sources, coupled with robust policies supporting economic expansion in a sustainable manner, are crucial for both groups of countries. For the E7, accelerating technology transfer and adopting stricter environmental regulations are key, while the G7 should focus on innovation and the continuous improvement of energy efficiency standards. This dual approach is essential for mitigating the environmental impacts of economic growth and steering the global economy towards a more sustainable trajectory.

Renewable energy adoption and CO2 emissions in G7 economies: In-depth analysis of economic prosperity and trade relations

This study investigates the relationships between economic, environmental, and trade factors within the G7 economies from 1990 to 2022, focusing on their impacts on carbon dioxide (CO2) emissions. Analyzing data from G7 economies such as Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The study employs multiple regression (MLR) models to examine the influence of economic and environmental factors on CO2 emissions. Additionally, factor loading analysis and structural equation modeling (SEM) is utilized to validate construct reliability and visualize complex relationships. The findings highlight positive correlations between GDP growth and employment, alongside negative correlations with income inequality. In addition, environmental challenges are evident through negative correlations with industrial and energy-related CO2 emissions. The practical implications highlight the importance for policymakers to prioritize strategies promoting economic growth, addressing income inequality, and fostering sustainable trade relationships within the G7 economies to ensure inclusive and sustainable development. This study contributes to the literature by offering comprehensive insights into the intricate dynamics between economic, environmental, and trade factors and their impacts on CO2 emissions.

Environmental impact of ISO 14001 certification in promoting sustainable development: The moderating role of innovation and structural change in BRICS, MINT, and G7 economies

Since the industrial era, the selection of energy sources to facilitate economic advancement has been criticized because of the resulting ecological calamity. This has prompted the introduction of radical approaches such as ISO 14001, which tackles the drivers of pollution. Therefore, this study analyses the ISO 14001—environment nexus from three distinct points of view: BRICS, MINT, and G7 countries from 1999–2020. Also, our work fills an extant gap in assessing structural change and innovation’s role in augmenting the relationship. The Driscoll and Kraay estimator is employed as an analytical tool for cross-sectional dependence and slope homogeneity, while the fixed effects approach provides sufficient robustness checks on the findings. While some outcomes vary per bloc, others are relatively similar across the three blocs. That is: (1) ISO 14001 shows an abatement portfolio for only the G7 bloc, and the Full sample. (2) Structural change showed potential for abating carbon emissions in all blocs. (3) Technology led to an increase in pollution in all blocs except for the MINT economy. (4) ICT in the form of mobile phones also help reduce carbon emissions in all three blocs except for their composite. (5) Renewable energy helps reduce carbon emission in all blocs except for G7. ISO 14001 shows the potential to encourage green growth. As a result, policymakers should work to enhance ISO 14001 certification, which might serve as a management tool to promote sustainable development.

Impact of green technology and energy on green economic growth: role of FDI and globalization in G7 economies

With the increase in economic growth, the world is facing serious challenges concerning environmental sustainability. Hence, the green economic growth is imperative for sustainable and inclusive development. The objective of this study is to contribute to the existing literature about the factors that influence green economic growth. The study investigates the role of green technology, green energy, foreign direct investment, and globalization on green economic growth in G7 countries. The data of the study is collected from WDI, KOF Swiss Economic Institute, and OECD database and the data period ranges from 1995 to 2020. The existence of cointegration between the variables of the study was tested by Westerlund’s (Oxford Bull Econ Stat 69(6):709–748) cointegration test. Due to the presence of cross-sectional dependency, the study employed the cross-sectional autoregressive distributed lag (CS-ARDL) method to estimate the coefficients in the long and short run. The study also used a common correlated effect—mean group (CCEMG) estimator for robustness check. The findings of the study reveal that green energy and FDI positively contribute to green economic growth in the long and short run. The green technology also contributes positively to enhance green economic growth but only in long run. To accelerate green economic growth, G7 countries should incorporate policies promoting green energy and technology, while acquiring more foreign investments to ensure a sustainable development.

Exploring the nexus of globalization and natural resource scarcity in driving green technology innovation: Insights from advanced panel data techniques

AbstractGreen technology innovation (GTI) plays a pivotal role in improving environmental sustainability. Our study fills a significant research gap by investigating how globalization and natural resource depletion (NRD) impact eco‐innovation. Rooted in knowledge spillover and ecological modernization theories, we utilize advanced panel data techniques, an aspect underexplored in empirical studies. Our panel data span G20 countries from 1986 to 2019, further dissected into sub‐panels—BRICS (emerging economies) and G7 (advanced economies). Initial tests reveal cross‐sectional dependencies and slope heterogeneities across all panels, corroborated by Westerlund cointegration test indicating a long‐term equilibrium. Driscoll–Kraay estimator highlights that economic and social globalization significantly drive eco‐innovation, while political globalization deteriorates GTI. The effect of NRD is also negative for G20 and BRICS countries, while G7 economies exhibit lower vulnerability to NRD shocks. Long‐run estimates from CS‐ARDL underscore the positive role of economic globalization in both the short and long run, while the negative role of NRD remains persistent in the long run. Panel quantile regression results prove that the effect of globalization is asymmetric across GTI distribution and varying across underlying groups. NRD, while hindering progress at higher quantiles, supports eco‐innovation at lower quantiles of advanced economies. Panel threshold estimations confirm the positive influence of both globalization and NRD, particularly for highly eco‐innovative nations. These findings bear significant policy implications, charting a path toward sustainable economic growth through the widespread adoption of green technology.

Resilience through mineral resource development, oil, and natural resource efficiency: Strengthening economies

This study examines the role of resilience in bolstering economies via the development of mineral resources and oil, alongside adaptability and natural resource efficiency, particularly within the G7 economies from 1995 to 2022. Employing the Generalized Method of Moments (GMM) model, the research aims to unravel the complexities of how resource-rich economies can leverage their natural assets to enhance economic resilience and sustainability. The investigation reveals a positive correlation between the strategic development of mineral resources, oil, and the adaptability of economies to external shocks, highlighting the critical importance of natural resource efficiency in ensuring long-term economic stability and growth. These findings underscore the necessity for G7 nations to implement policies that not only foster the responsible exploitation and development of natural resources but also promote adaptability and efficiency in resource use. The study's policy implication suggests a paradigm shift towards more sustainable and resilient economic models, emphasizing the balanced integration of resource development and environmental stewardship.

Non-linear relationship between FinTech, natural resources, green innovation and environmental sustainability: Evidence from panel smooth transition regression model

The rapid global economic growth has expressed worries regarding the depletion of natural resources and environmental sustainability. In such a situation, expanding FinTech, optimizing natural resource consumption, and escalating green innovation can serve as potential solutionsfor enhancing environmental sustainability. This research looks into the intricate relationship among FinTech, natural resources, green innovation, and environmental sustainability in the panel data comprised of G7 and G11 economies by employing the Panel Smooth Transition Regression Model, which assists inscrutinizing the asymmetric or non-linear association among the variables under consideration. Findings reveal the pivotal role of FinTech, Natural Resource Rent, and Green Innovation in shaping sustainable environment across bothG7 and G11 economies. FinTech demonstrates a momentous and affirmativeimpression on ecological quality, promoting digital transactions and reducing paper-based processes, which, in turn, lessens deforestation and carbon emissions from paper production. FinTech also enhances financial inclusion and fosters investment in eco-friendly projects. Natural Resource Rent, in contrast, significantly leads to the decline of the environment through its extensive use, resulting in elevated carbon emissions. Finally, Green innovation exhibits a remarkable and positive influence on carbon emissions, facilitating the shift from carbon-intensive resources to eco-friendly alternatives, thus reducing pollution and improving air quality. These findings underscore the importance of adopting less-carbon-emitting technologies to achieve carbon neutrality goals in both G7 and G11 countries. The research provides valuable insights for policymakers and offers recommendations for a more sustainable future.