İstanbul İktisat Dergisi 2602-4152 2602-3954 İstanbul Üniversitesi 10.26650/ISTJECON2025-1830423 Ecological Economics Ekolojik İktisat The Impact of Financial Innovation, Trade Openness, Foreign Direct Investment, and Economic Growth on Ecological Footprint: New Evidence from the Top 10 Financially Innovative Countries https://orcid.org/0000-0002-4439-596X Turan Yunus Emre SAKARYA UNIVERSITY https://orcid.org/0000-0001-5965-3709 Tarım Emre LANCASTER UNIVERSITY https://orcid.org/0009-0006-4516-2515 Zubaidullina Dinara SAKARYA UNIVERSITY OF APPLIED SCIENCES 01 15 2026 75 2 632 657 11 27 2025 12 27 2025 Copyright © 1939, İstanbul İktisat Dergisi 1939 İstanbul İktisat Dergisi

This study investigates the impact of financial innovation, trade openness, foreign direct investment (FDI), and economic growth on the ecological footprint. Originally designed to examine the nexus between economic growth and environmental quality, the environmental Kuznets curve (EKC) hypothesis has been tested with other factors too, such as FDI and trade. Financial innovation, on the other hand, has not attracted the same attention in the literature. This is surprising because financial innovation is as important as trade openness and FDI in the transition to more sustainable economies. We therefore test the EKC hypothesis with these factors on the top 10 financially innovative economies from 1996 to 2017. We employ panel data cointegration and causality tests and two different long-run estimators. Based on the outcomes obtained by the cointegration and long-run coefficient analyses, the EKC postulate is empirically supported solely in the cases of Switzerland and Turkey. Moreover, financial innovation lessens the pressure on the ecological footprint only in Chile and Colombia. It is also observed that findings concerning causal relationships show divergence when comparing one country to another. The direction of the causality is from FDI and trade openness to the ecological footprint for the whole panel. However, there is a bidirectional causality between financial innovation and ecological footprint. According to the overall results, policymakers should be aware of the effects of financial innovation, FDI, and trade openness on the ecological footprint while trying to reach higher levels of economic growth and development.

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