Financial contagion and the circular economy paradigm: opportunities and challenges for Romania

This study investigates the relationship between financial contagion and the transition to a circular economy in Romania, analyzing the impact of economic and environmental factors on CO2 emissions. Using an ARDL model, the study examines the short-term and long-term influence of variables such as GDP, recycling rate, resource productivity, foreign direct investment, and renewable energy consumption on CO2 emissions. The results show that, in the short term, resource productivity and foreign investments have a significant impact on emissions, while GDP has a positive influence on them. In the long term, although the analyzed variables suggest a potential for reducing emissions, the statistical significance is limited. The diagnostic tests confirm the stability and correct specification of the model, and the analysis suggests that the transition to a circular economy may be affected by Romania’s vulnerability to external financial shocks and underdeveloped infrastructure. The conclusions underline the importance of coherent policies and sustainable investment in support of sustainable development in Romania.