Financial Development and Renewables in Southeast Asian Countries—The Role of Organic Waste Materials

Abstract

This paper aims to fill the existing gap by investigating the linkage between organic waste materials, financial development and renewables in Southeast Asia; this is the very first study covering this area. Using panel data of ten economies in this area in the period of 1990–2016 and estimating the advanced regression method in statistics of pooled mean group (PMG) estimates, the paper aims to examine the panel unit root tests in the first and second generations, as well as cointegration tests followed by Pedroni, Kao, and Westerlund tests; the results demonstrate that there is a negative impact from financial development on renewables. Further, biofuel processing is consistent with renewables that are predominantly made from organic matter and wastes. In addition, biofuel sources can be proxied by three factors, namely agricultural land, forest land, and number of heads of cattle livestock. The agricultural land has a negative and statistically significant impact on renewables while cattle livestock has a positive effect in the long run. Additionally, a higher level of trade openness has a lower level of renewables in the case of Southeast Asian countries.