Analyzing the environmental impact of financial innovation and financial globalization in Finland: a time‒frequency approach

Abstract This research addresses a significant gap in previous studies by exploring Finland through new and innovative lenses. First, it offers an in-depth analysis of the impact of financial innovation (FI) and financial globalization (FG) on the ecological footprint (EF) using data from 1991Q1 to 2022Q4. Second, the study incorporates the roles of renewable energy consumption (REC) and economic growth (EG). Third, it employs advanced wavelet tools, including wavelet coherence, partial wavelet coherence (PWC), and multiple wavelet coherence (MWC), to capture the relationships across various time periods. In addition, wavelet Granger causality was used to identify the causal relationships among the variables. The results from wavelet coherence indicate that, in the short and medium terms, FI increases the EF, whereas FG decreases the EF. Additionally, EG increases EF, whereas REC reduces EF in the medium and long terms. To validate the wavelet coherence findings, PWC and MWC were used as robustness tests. The results showed that EG primarily impacts EF in the short and medium terms, whereas REC has the strongest long-term effect. On the basis of these findings, policies are formulated.