Analysing the Effect of Climate Change and Green Stocks on Economic Growth: Evidence from Indonesia and Malaysia
https://doi.org/10.56225/ijfeb.v3i2.297
Keywords:
Climate change, Economic growth, Green stock, Autoregressive Distributed Lag approachAbstract
Contemporary economic growth shows a direct correlation between energy consumption and productivity. As economic development and technological advancements enhance living standards, the demand for natural resources and energy has concomitantly increased. This investigation examines the impact of climate change and green stocks on economic growth and the causal relationships among these variables in Indonesia and Malaysia over short- and long-term periods. Climate change has resulted in a downward trend in economic growth fluctuations, underscoring the necessity for green finance to mitigate the effects of climate change. The study employs the Autoregressive Distributed Lag (ARDL) model and Granger Causality test, analysing data on carbon emissions, green stocks, and gross domestic product from 2016-2022 (quarterly). The findings indicate that, in the short term, only green stocks positively influence economic growth in Indonesia and Malaysia. In the long run, climate change and green stocks positively affect economic growth in these countries. Economic growth demonstrates a unidirectional causal relationship with climate change, whereas climate change exhibits a unidirectional causal relationship with green stocks. This implies that green stock can mitigate climate change risks in Indonesia and Malaysia. It is recommended that the central bank consider implementing an environmentally sustainable financial system to promote economic growth.
Downloads
References
Agustia, D., Harymawan, I., Permatasari, Y., & Haryanto, S. D. (2022). Sustainability - Konsep dan Pelaporan. Surabaya: Airlangga University Press.
Akpokerere, E. O. (2024). The Effect of Government Expenditure on Economic Growth in Nigeria. International Journal of Economics and Financial Management, 9(1), 15–43. https://doi.org/10.56201/ijefm.v9.no1.2024.pg15.43
Ardiaa, D., Bluteaua, K., Boudtb, K., & Inghelbrechtc, K. (2021). Climate change concerns and the performance of green versus brown stocks (Issue 126).
Barberà-Mariné, M. G., Fabregat-Aibar, L., Neumann-Calafell, A. M., & Terceño, A. (2023). Climate change and stock returns in the european market: An environmental intensity approach. Journal of Environmental Management, 345(June). https://doi.org/10.1016/j.jenvman.2023.118927
Bhave, A. G., Conway, D., Dessai, S., & Stainforth, D. A. (2016). Barriers and opportunities for robust decision making approaches to support climate change adaptation in the developing world. Climate Risk Management, 14, 1–10. https://doi.org/10.1016/j.crm.2016.09.004
Boakye, P., & Paper, W. W. (2014). The effect of climate change on economic growth : Evidence from Sub-Saharan Africa.
Dafermos, Y., Nikolaidi, M., & Galanis, G. (2018). Climate Change, Financial Stability and Monetary Policy. Ecological Economics, 152(June), 219–234. https://doi.org/10.1016/j.ecolecon.2018.05.011
Fang, T., Su, Z., & Yin, L. (2021). Does the green inspiration effect matter for stock returns? Evidence from the Chinese stock market. Empirical Economics, 60(5), 2155–2176. https://doi.org/10.1007/s00181-020-01843-1
Fitrah, R., & Soemitra, A. (2022). Green Sukuk For Sustainable Development Goals in Indonesia: A Literature Study. Jurnal Ilmiah Ekonomi Islam, 8(1), 231. https://doi.org/10.29040/jiei.v8i1.4591
Fritz, M., & Koch, M. (2016). Economic development and prosperity patterns around the world: Structural challenges for a global steady-state economy. Global Environmental Change, 38, 41–48. https://doi.org/10.1016/j.gloenvcha.2016.02.007
Hassan, S. T., Xia, E., Khan, N. H., & Shah, S. M. A. (2019). Economic growth, natural resources, and ecological footprints: evidence from Pakistan. Environmental Science and Pollution Research, 26(3), 2929–2938. https://doi.org/10.1007/s11356-018-3803-3
Khan, S. A. R., Yu, Z., Sharif, A., & Golpîra, H. (2020). Determinants of economic growth and environmental sustainability in South Asian Association for Regional Cooperation: evidence from panel ARDL. Environmental Science and Pollution Research, 27(36), 45675–45687. https://doi.org/10.1007/s11356-020-10410-1
Khan, Y., Bin, Q., & Hassan, T. (2019). The impact of climate changes on agriculture export trade in Pakistan: Evidence from time-series analysis. Growth and Change, 50(4), 1568–1589. https://doi.org/10.1111/grow.12333
Loiseau, E., Saikku, L., Antikainen, R., Droste, N., Hansjürgens, B., Pitkänen, K., Leskinen, P., Kuikman, P., & Thomsen, M. (2016). Green economy and related concepts: An overview. Journal of Cleaner Production, 139, 361–371. https://doi.org/10.1016/j.jclepro.2016.08.024
Mangunjaya, F. (2015). Mempertahankan Keseimbangan: Perubahan Iklim, Keanekaragaman Hayati, Pembangunan Berkelanjutan, dan Etika Agama. Jakarta: Yayasan Pustaka Obor Indonesia.
Naeem, M. A., Adekoya, O. B., & Oliyide, J. A. (2021). Asymmetric spillovers between green bonds and commodities. Journal of Cleaner Production, 314(June), 128100. https://doi.org/10.1016/j.jclepro.2021.128100
Nasir, MA and Duc Huynh, T. and X. T. (2019). Role of Financial Development , Economic Growth & Foreign Direct Investment in Driving Climate Change : A Case of Emerging ASEAN Muhammad Ali Nasir * 1 , Toan Luu Duc Huynh ^ , Huong Thi Xuan Tram ^ ^ School of Banking , University of Economics Ho Chi Min. Journal of Environmental Management, 242(ISSN 0301-4797), 131–141.
Nasir, M. H., & Zhang, S. (2024). Evaluating innovative factors of the global innovation index: A panel data approach. Innovation and Green Development, 3(1), 100096. https://doi.org/10.1016/j.igd.2023.100096
Ning, Y., Cherian, J., Sial, M. S., Álvarez-Otero, S., Comite, U., & Zia-Ud-Din, M. (2022). Green bond as a new determinant of sustainable green financing, energy efficiency investment, and economic growth: a global perspective. Environmental Science and Pollution Research, 0123456789. https://doi.org/10.1007/s11356-021-18454-7
Park, S. R., & Jang, J. Y. (2021). The impact of ESG management on investment decision: Institutional investors’ perceptions of country-specific ESG criteria. International Journal of Financial Studies, 9(3). https://doi.org/10.3390/ijfs9030048
Pertiwi, N., Ratnawati, K., & Aisjah, S. (2020). Understanding Country Risk Toward Foreign Direct Investment Moderated By Ease Of Doing Business Ranking (Study in ASEAN (Indonesia, Malaysia, Thailand, Philippines, and Vietnam)). Jurnal Aplikasi Manajemen, 18(2), 269–276. https://doi.org/10.21776/ub.jam.2020.018.02.07
Rasiah, R., Al-Amin, A. Q., Chowdhurry, A. H., Ahmed, F., & Zhang, C. (2018). Climate change mitigation projections for ASEAN. Journal of the Asia Pacific Economy, 23(2), 195–212. https://doi.org/10.1080/13547860.2018.1442145
Reddy, P. P. (2015). Climate resilient agriculture for ensuring food security. Climate Resilient Agriculture for Ensuring Food Security, 1–373. https://doi.org/10.1007/978-81-322-2199-9
Rezai, A., Taylor, L., & Foley, D. (2018). Economic Growth, Income Distribution, and Climate Change. Ecological Economics, 146(17), 164–172. https://doi.org/10.1016/j.ecolecon.2017.10.020
Sakuntala, D., Majid, M. S. A., Aliasuddin, & Suriani, S. (2022). Causality between Green Stock Market with Monetary Policy, Global Uncertainty, and Environmental Damage in Indonesia. International Journal of Energy Economics and Policy, 12(6), 215–223. https://doi.org/10.32479/ijeep.13348
Silva, P. P. da, Cerqueira, P. A., & Ogbe, W. (2018). Determinants of renewable energy growth in Sub-Saharan Africa: Evidence from panel ARDL. Energy, 156, 45–54. https://doi.org/10.1016/j.energy.2018.05.068
Trisnowati, Y., Achsani, N. A., Sembel, R., & Andati, T. (2022). The Effect of ESG Score, Financial Performance, and Macroeconomics on Stock Returns during the Pandemic Era in Indonesia. International Journal of Energy Economics and Policy, 12(4), 166–172. https://doi.org/10.32479/ijeep.13212
Wang, Y., & Huang, Y. (2022). Impact of Foreign Direct Investment on the Carbon Dioxide Emissions of East Asian Countries Based on a Panel ARDL Method. Frontiers in Environmental Science, 10(June), 1–10. https://doi.org/10.3389/fenvs.2022.937837
Yii, K. J., & Geetha, C. (2017). The Nexus between Technology Innovation and CO2 Emissions in Malaysia: Evidence from Granger Causality Test. Energy Procedia, 105, 3118–3124. https://doi.org/10.1016/j.egypro.2017.03.654
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Authors
This work is licensed under a Creative Commons Attribution 4.0 International License.
