A Critical Review of the Relationship Between Environmental Performance Index, Financial Development and Economic Growth

Abstract

Purpose: Through a literature review, this study aims to understand the relationship between the Environmental Performance Index (EPI), Financial Development, and Economic Growth. In order to provide a complete understanding of the impact of EPI and Financial Development on Economic Growth, the authors propose a conceptual framework based on empirical data. In order to expand knowledge in this field, the study also seeks to identify gaps in the literature and recommend new lines of inquiry.   Design/Methodology/Approach: This study conducts an extensive literature analysis emphasizing publications between 2018 and 2022. The literature of developed, developed-group, and developing countries will be thoroughly and a comprehensive and systematic literature review will be conducted to meet the goals of this study. However, a qualitative method will help us better understand how EPI and financial development affect economic growth and sustainable development because the results and conclusions of empirical investigations need to be more consistent.   Findings: The study concluded that environmental performance and sustainability are essential for achieving economic growth and development in industrialized countries, and policymakers should give top priority to settling carbon costs and taxes, commercializing low-CO2 emissions technologies, cutting non-renewable energy subsidies, offering technology transfer programs, and developing a green trade policy. The study also emphasized the potential of sustainable financial systems and renewable energy to lower emissions and promote economic growth in developing nations. However, successful policies and investments in green technologies are required to achieve this balance.   Practical implication:  This study has practical implications for policymakers who must prioritize sustainable development goals in their economic policies. This includes promoting renewable energy, reducing carbon emissions, and implementing green trade policies. The study highlights the critical role of government policies in promoting sustainable economic growth, particularly the EPI and Financial Development.   Originality/Value: This study's originality and value lie in its examination of the complex relationship between environmental sustainability, financial development, and economic growth across different countries and regions. The study emphasizes the role of government policies, specifically the EPI and Financial Development, in promoting sustainable economic growth and provides practical implications for policymakers. The study also highlights the need for further research to identify effective policies for promoting sustainable economic growth.