INTEGRATING FISCAL MATTERS WITH ENVIRONMETAL SUSTAINABILITY IN ASEAN COUNTRIES: ROLE OF FISCAL DEFICIT, INTEREST RATE AND STOCK EXCHANGE INDEX

Abstract

The current study was carried out with the objective of evaluating the relationship between environmental sustainability and fiscal deficit, stock exchange index & interest rate. A panel data methodology has been used for the period ranging 1995-2018. The econometric tests of cross-sectional dependence, cointegration, unit root and long run estimations were employed in the study. The estimation of the long run associations has been performed on the basis of the AMG estimations. The AMG estimations showed that interest rate and fiscal deficit have negative relationship with environmental sustainability, whereas increase in the stock exchange index, capitalization of the indexed companies has positive and significant effects on the environmental sustainability. The Konya causality analysis shows that the variables present bidirectional associations. The present study is novel as it is based upon studying the fiscal macroeconomic indicators and their relevance to the environmental sustainability. The novelty and significance of the study is reinforced by the fact that a new dataset has been used. The current study is also important from the regional standpoint as developments are being made in the ASEAN region. The study has some limitations which have been discussed along with the theoretical and policy making implications.