Energy productivity, financial stability, and environmental degradation in an Eastern European country: Evidence from novel Fourier approaches

The global transition to net zero is largely based on the existential threats of carbon emissions to humanity and global sustainability. Policymakers have committed to finding pathways that reduce the amount of carbon dioxide emitted. To get insights for policy making, this study aims at investigating the effect of financial stability and energy productivity on environmental degradation in Bulgaria using novel Fourier estimators. The outcomes of the study indicate (i) both energy productivity and financial stability have positive effects on environmental degradation; (ii) rising economic growth exerts a positive effect on CO(2) emissions. The outcomes offer weighty policy insights on energy productivity investments for the government of Bulgaria, particularly on smart energy technologies; energy productivity financing; smart manufacturing; efficient transportation, energy use behavioral change, and smart water infrastructure. Additionally, the government of Bulgaria could enact policies for financial stability improvements; and for controlling fossil fuel-facilitated economic growth. Finally, given that price stability policy focus failed during the 2008 global financial crisis, a major policy focus could be to improve on the new macroprudential policy framework for Bulgarian Central Bank towards delivering financial stability and environmental sustainability.