The Water, Food, and Energy Nexus: The Inclusive Roles of Governance and Finance in South Asia

Abstract

This research aims to identify the intricate connections arising from finance and governance to water, food, and energy, utilizing data from 2000 to 2021 for eight South Asian countries. To address cross-sectional dependence and panel heterogeneity, this study applied an augmented mean group (AMG) approach to discover long-term connections across the chosen indicators. The estimators' outcome shows interconnectedness across water, food, and energy (WFE) resources, showing that water promotes food and energy, and food promotes water and energy. In contrast, energy fosters food production and reduces water availability. Further, governance positively influences food production (0.434%), water (0.044%), and energy consumption (0.142%). Likewise, finance positively and significantly responds to WFE consumption. Our results highlighted that governance unilaterally influences energy dynamics while bidirectional causal links emerge between finance, food, and energy. The obtained outcomes are re-validated with feasible generalized least square (FGLS) and Driscoll and Kraay (DK) estimators. Ultimately, our study offers valuable insights for shaping economic, environmental, and food and water security policies in the region and beyond.