Examining the role of the circular economy in sustainable development: insights from dynamic ARDL and KRLS estimation techniques

Purpose: The circular economy plays a significant and complex role in advancing sustainable development through resource efficiency, waste reduction and ecosystem protection. Nevertheless, the empirical investigation of this interconnection is currently in its early stages. This study aims to examine the impact of the various categories of the circular economy on sustainable development. The study also investigates the simulated and incremental effects of different categories of circular economy on sustainable development. Design/methodology/approach: For this purpose, we collect data from 1990 to 2021 from Germany and apply the dynamic autoregressive distributed lag simulation model. Moreover, the kernel-based linear regression (KRLS) technique is utilized to examine the robustness of the result, which explores the incremental impact of the circular economy on sustainable development. Findings: The findings indicate that the impact of different categories of circular economy varies in direction and magnitude over different horizons. Reuse and repair contribute significantly to sustainable development, whereas renewable energy consumption and recycling barely impact sustainable development. The outcomes of the KRLS reveal that each category of the circular economy positively contributes to sustainable development, albeit at considerably higher levels. Research limitations/implications: Our study has used proxies to capture the different categories of circular economy, which presents the limitations of the study. The findings could offer greater clarity and precision if we had access to direct data on the various aspects of the circular economy. Practical implications: The study’s findings are crucial for decision-making and planning various categories of circular economy, emphasizing socioeconomic aspects to guide policymakers and practitioners in enhancing sustainable development. Originality/value: Germany has implemented circular economy practices and took measures for sustainable development. Therefore, we examine whether each category of the circular economy has an impact on sustainable development in Germany or not.