The Circular Economy, Ecological Footprint and Sustainable Development in the I4.0 Era: PBARDL and PQARDL Methods

Despite growing interest in sustainability transitions, there is the limited literature on how Industry 4.0, the circular economy, renewable energy, and ecological sustainability interact. This paper aimed to analyze the nexus among Industry 4.0, the circular economy, ecological footprint, renewable energy, and sustainable development across 14 European countries during 2001–2024 by using the PBARDL and Panel PQARDL approaches as well as the panel Granger causality test. To capture both average and distributional effects, the analysis employed Panel Bootstrap ARDL (PBARDL), Panel Quantile ARDL (PQARDL) and panel Granger causality tests. In the first stage, the PBARDL test was employed to determine the dependent variables. The existence of a single cointegrated vector was confirmed by a country-specific Johansen test and Panel Johansen test. Both the PQARDL methods, which has two and three quantiles, and the PBARDL method showed the evidence of cointegration among the selected variables. The long-run and short-run coefficients as well as the ECM coefficients of the PQARDL test were compared with those of the PBARDL test. Granger causality results were obtained. In the second stage, robustness testing was performed for the PQARDL model. The model was tested by excluding the control variable and the results of the model without control variables were compared with those of the main PQARDL model. Subsequently, alternative values of λ were applied to the model without control variables. The obtained results confirmed the baseline model’s results. Finally, to avoid the reverse causality problem, the results of the Granger causality test under different lag structures confirmed the stability of the estimated directions of Granger causality. Granger causality results revealed the evidence of one-way causality from the circular economy to renewable energy and from Industry 4.0 to the circular economy. Evidence of bidirectional causality was found between the CE and the ecological footprint; the ecological footprint and renewable energy; SDI and renewable energy; the CE and renewable energy; and I4.0 and renewable energy. According to the results, government policies need to focus more on renewable energy, energy transition, sustainable development, and the circular economy.