The implications of the ecological footprint and renewable energy usage on the financial stability of South Asian countries

This study explores the complex relationships involving ecological footprints, energy use, carbon emissions, governance efciency, economic prosperity, and fnancial stability in South Asian nations spanning the period from 2000 to 2022. Employing various methodologies such as cross-sectional dependence tests, co-integration analysis, and frst- and second-generation unit-root tests, we use a panel Autoregressive Distributed Lag model, feasible generalized least squares, and Panel Corrected Standard Errors to ensure the robustness of our fndings. We fnd noteworthy positive correlations between several variables, including heightened ecological consciousness, efective governance structures, increased GDP per capita, and amplifed CO2 emissions. These relationships suggest potential pathways to strengthen the fnancial stability of the entire region; they also highlight the latent potential of embracing ecologically sustainable practices to fortify economic resilience. Our results also underscore the pivotal role of appropriate governance structures and higher income levels in bolstering fnancial stability in South Asian countries. Interestingly, we also fnd negative coefcients associated with the use of renewable energy, suggesting that escalating the adoption of renewable energy could create fnancial instability. This fnding stresses the importance of diversifcation in energy strategies, cautioning policymakers to carefully consider the fnancial ramifcations of potentially costly imports of renewable energy sources while seeking to reduce carbon emissions, emphasizing the need to strike a balance between ambitious sustainability goals and the pursuit of sustained economic robustness in the region. In considering the implications of these fndings, it is crucial to consider each country's broader socioeconomic context. Our results ofer valuable insights for policymakers in developing renewable energy strategies.