Agricultural credit and agri-environmental sustainability in the Mediterranean Basin through the lens of the EKC and PHH hypotheses

This study aims to determine the nexus between agricultural credit and agri-environmental sustainability for the Mediterranean Basin. For this purpose, this study uses a comprehensive index of agri-environmental degradation, which indicates that a high value of the agri-environmental degradation index indicates low agri-environmental sustainability. The nexus between agricultural credit and agri-environmental sustainability is investigated using robust panel econometric tools, including Augmented Average Group (AMG) and Panel Quantile Regression (PQR). This study revisits the Pollution Haven Hypothesis (PHH) and Environmental Kuznets Curve (EKC) hypothesis, confirming the existence of the EKC phenomenon but the non-existence of the PHH for the economies of the Mediterranean Basin. Moreover, empirical evidence shows that agricultural credit positively affects agri-environmental sustainability, and that agri-environmental sustainability exhibits bidirectional causality with per capita gross domestic income, population, and renewable energy consumption. Finally, there is unidirectional causality between foreign direct investment and agricultural credit. Findings show that the economic pathways of the analyzed blocks regarding environmental concerns are still in their developmental stages. Therefore, stable agricultural credit policies are needed to combat agri-environmental sustainability.