The Dynamics Between Green Innovation and Environmental Quality in the UAE: New Evidence from Wavelet Correlation Methods

Environmental sustainability has emerged as a global imperative in the context of accelerating climate change, rapid industrialization, and increasing ecological stress. Ecological quality is necessary for countries to pursue because of its overall benefits to the entire ecosystem. Therefore, due to the significant role that the United Arab Emirates (UAE) plays in the global environment, this research examines the role of Green Innovation (GI), Financial Globalization (FG), Economic Growth (GDP), and Foreign Direct Investment (FDI) in influencing Environmental Quality (EQ) in the UAE from 1991–2022. The UAE is well known for these economic indices. Furthermore, this study employed the innovative Quantile Augmented Dickey–Fuller (QADF) test, Wavelet Quantile Regression (WQR), Wavelet Quantile Correlation (WQC), and Quantile-on-Quantile Granger Causality (QQGC). WQR is able to identify connections between series over a range of quantiles and periods. WQC evaluates the co-movement between variables at different quantile levels and across several scales. The QQGC captures the causal effect of the regressors on EQ. These methods are quite advanced compared to other traditional econometric methods. Based on the outcome of the WQR and WQC methods, evidence shows that GI contributes to EQ across all quantiles in the short, medium, and long term, while FG, GDP, and FDI reduces EQ across all quantiles in the short, medium, and long term. The QQGC results also affirm causality among the variables, implying that GI, FG, GDP, and FDI can predict EQ across all quantiles. This research recommends that the UAE should improve on its environmental policies both domestically and internationally by making them more stringent, and continue to promote clean energy investments.