Showing papers on "Cointegration published in 2019"

Revisiting the environmental Kuznets curve (EKC) hypothesis in India: the effects of energy consumption and democracy.

Abstract: The study revisits the position of the environmental Kuznets curve (EKC) hypothesis in India by incorporating the role of energy consumption and democratic regime in the environmental degradation function for the period 1971-2014. Employing Zivot-Andrews nonstationarity test, Bayer-Hanck cointegration test, autoregressive distributed lag (ARDL) model, and vector autoregressive model (VECM) Granger causality test, the results found the integration order of I(1) and a stable cointegration among the series. The result validates the EKC hypothesis for India and further divulges that while energy consumption increases environmental degradation both in the long run and short run; the effect of democracy in reducing environmental degradation is weak (statistically insignificant) in the long run but strong (statistically significant) in the short run. The finding from the VECM Granger causality test indicates a long-run causality between the fundamental variables and environmental degradation. Furthermore, the results of the short run show a unidirectional Granger causality running from energy consumption to environmental degradation, energy consumption to real income, and energy consumption to square of real income. Therefore, our findings suggest that energy conservation policy should be prioritized towards harnessing energy from clean sources to mitigate environmental degradation and spur economic growth.

The impact of globalization and financial development on environmental quality: evidence from selected countries in the Organization for Economic Co-operation and Development (OECD).

Abstract: This study investigates the impacts of globalization and financial development on environmental quality by incorporating energy consumption in the framework of the Environmental Kuznets Curve (EKC) hypothesis for selected countries in the Organization for Economic Co-operation and Development (OECD) over the 1990-2014 time spans. The cross-sectional dependence is determined by using the cross-sectional dependence and Lagrange Multiplier (LM) methods. This study employs second-generation panel unit root tests to check the unit root properties and the Westerlund panel cointegration test to examine the long-run equilibrium relationship among the variables. The results confirm the presence of cointegration in the long run. The Continuously Updated Fully Modified Ordinary Least Square (CUP-FM) and Continuously Updated Bias-Corrected (CUP-BC) approaches are applied to investigate long-term output elasticities of the variables. The results show the stimulating role of energy consumption on Carbon dioxide (CO2) emissions. This study finds support for the EKC hypothesis as it relates to selected OECD countries. Globalization and financial development increase environmental quality by reducing CO2 emissions. The causal relationship reveals the presence of a bidirectional relationship between energy consumption and CO2 emissions. The feedback causal effect runs between economic growth and CO2 emissions and between globalization and economic growth, while unidirectional causality runs from CO2 emissions to financial development, from economic growth to energy consumption, from energy consumption to financial development, from globalization to energy consumption, and from globalization to financial development. Policies that support green technology transfer among OECD countries, foreign direct investment in the renewable energy sector, financial development to support green infrastructure, and energy generation using renewable energy sources are recommended.

Impact of financial development and economic growth on environmental quality: an empirical analysis from Belt and Road Initiative (BRI) countries.

Abstract: This study aims to analyze the impact of financial development, foreign direct investment, economic growth, electricity consumption, and trade openness on environmental quality for a panel of 59 Belt and Road Initiative (BRI) countries, over the period of 1980–2016. The presence of the environmental Kuznets curve (EKC) hypothesis is investigated. The cross-sectional augmented Dickey-Fuller (CADF) and cross-sectional Im, Pesaran, and Shin panel unit root test; the Westerlund cointegration test, the dynamic seemingly unrelated regression (DSUR) approach; and the Dumitrescu and Hurlin (Econ Model 29:1450–1460, 2012) panel causality approach are employed. It is found that the analyzed variables are stationary at first differences and are cointegrated. It is also found that an increase in financial development, foreign direct investment, and trade openness enhance environmental quality, while the increase in economic growth and electricity consumption degrade environmental quality. The presence of the EKC hypothesis for the selected panel countries is validated. Furthermore, the Dumitrescu-Hurlin (DH) panel causality test result confirmed the presence of bidirectional causality among economic growth, foreign direct investment, financial development, electricity consumption, and trade openness with environmental quality.

Ecological footprint, urbanization, and energy consumption in South Africa: including the excluded

Abstract: The study explores the relationship between ecological footprint, urbanization, and energy consumption by applying the ARDL estimation technique on data spanning 1965–2014 for South Africa. After applying the unit root test that accounts for a break in the data, the Bayer and Hanck (J Time Ser Anal 34:83–95, 2013) combined cointegration test affirms cointegrating relationship among the variables. Findings further reveal that economic growth and financial development exact a deteriorating impact on the environment in the short run. However, the same was not true for both energy use and urbanization. While urbanization and energy use promote environmental quality in the long run, financial development and economic growth degrade it further. The long-run findings of our study are confirmed to be robust as reported by the fully modified OLS (FMOLS), dynamic OLS (DOLS), and the canonical cointegrating regression (CCR) estimates. The direction of causality supports the energy-led growth hypothesis for South Africa. Policy outcomes and directions, and the possibility of promoting sustainable growth without degrading the environment are discussed.

The effects of economic growth and innovation on CO2 emissions in different regions.

Abstract: Economic growth and economic energy consumption have received greater attention due to its contribution to global CO2 emissions in recent decades. The literature on CO2 emissions and innovation for regional differences is very scanty as there is not enough study that considered different regions in a single analysis. We adopt a holistic approach by incorporating different regions so as to assess how innovation contributes to emission reduction. The study, therefore, examined the effects of innovation and economic growth on CO2 emissions for 18 developed and developing countries over the period of 1990 to 2016. The study used panel technique capable of dealing with cross-section dependence effects: panel cross-sectional augmented Dickey-Fuller (CADF) unit root to determine the order of integration, Westerlund cointegration tests confirmed that the variables are co-integrated. We employed panel fully modified ordinary least square (FMOLS) and panel dynamic ordinary least square (DOLS) to estimate the long-run relationship. The results show that energy consumption increases CO2 emissions at all panel levels. However, innovation reduces CO2 emissions in G6 while it increases emissions in the MENA and the BRICS countries. Environmental Kuznets curve (EKC) hypothesis is valid for the BRICS. The pollution haven hypothesis (PHH) and pollution halo effect were confirmed at different panel levels. Based on the findings different policy recommendations are proposed.

Effects of energy consumption, economic growth, and financial development on carbon emissions: evidence from heterogeneous income groups.

Abstract: This paper examines the effects of energy consumption, economic growth, and financial development on carbon emissions in a panel of 122 countries. We employ both first-generation and second-generation cointegration and estimation procedures in order to address diverse economic and econometric issues such as heterogeneity, endogeneity, and cross-sectional dependence. We find a cointegration relationship between the variables. Energy consumption, economic growth, and financial development have detrimental effects on carbon emissions in the full sample. When the sample is split into different income groups, we reveal that economic growth and financial development mitigate carbon emissions in high-income group but have the opposite effects in low-income and middle-income groups. The implication of the findings is that energy consumption increases carbon emissions. While high levels of income and financial development decrease carbon emissions, low levels of income and financial development intensify it. Based on the findings, the paper makes some policy recommendations.

The effect of carbon dioxide emission and the consumption of electrical energy, fossil fuel energy, and renewable energy, on economic performance: evidence from Pakistan.

Abstract: Energy affects the economic growth and development of a country. Renewable energy has become an important part of the world’s energy consumption. The use of fossil fuel energy contributes to global warming and carbon dioxide emissions, and has a detrimental effect on the environment. The long-run and short-run causality relationships between electric power consumption, renewable electricity output, renewable energy consumption, fossil fuel energy consumption, energy use, carbon dioxide emissions, and gross domestic product per capita for Pakistan over the period of 1990–2017 were investigated in this paper using the autoregressive distributed lag bounds testing approach to cointegration. The augmented Dickey–Fuller unit root test and the Phillips–Perron unit root test were used to check the stationarity of the variables, while the Johansen cointegration test was applied to check the robustness of the long-run relationships. The Granger causality test under the vector error correction model extracted during the short-run estimation showed a unidirectional relationship among all variables except for the relationship between gross domestic product per capita and carbon dioxide emission, which was bidirectional (feedback hypothesis). The evidence showed that in the long run, carbon dioxide emissions, electric power consumption, and renewable electricity output had a positive and significant relationship with the gross domestic product per capita, while the relationship of renewable energy consumption, energy use, and fossil fuel energy consumption with the gross domestic product per capita had a negative effect. Overall, the long-run effects of the variables were found to have a stronger effect on the gross domestic product per capita than the short-run dynamics, which indicated that the findings were heterogeneous. The evidence suggests that the government of Pakistan should take steps to enhance the use of renewable energy resources to resolve the energy crisis in the country and introduce new policies to reduce carbon dioxide emissions.

Assessment of Green Investments’ Impact on Sustainable Development: Linking Gross Domestic Product Per Capita, Greenhouse Gas Emissions and Renewable Energy

Abstract: The paper analyses the linkages between GDP per capita, greenhouse gas (GHG) emissions, and renewable energy (RE) in the total final energy consumption and green investments (PICE) which are measured as private investments, jobs, and gross value added related to circular economy sectors. The object of the analysis is the EU countries during the 2008-2016 period (crisis and post-crisis period). In the paper, data from the following databases was used: the Eurostat, the World Data Bank, and the European Environmental Agency. For addressing the linkages between the aforementioned indicators, the following methods were applied: panel unit root test, Pedroni panel cointegration tests, and the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) panel cointegration techniques. The findings show that FMOLS and DOLS demonstrate the same results as GHG, PICE, RE influence on GDP of the EU countries. The findings prove there is linking between gross domestic product per capita, greenhouse gas emissions, renewable energy in the total final energy consumption and green investments. The findings also show that green investment (PICE) could provoke the growth of GDP per capita by 6.4%, the decline of GHG by 3.08%, and the increase of renewable energy in the total final energy consumption by 5.6%.

Linking between Renewable Energy, CO2 Emissions, and Economic Growth: Challenges for Candidates and Potential Candidates for the EU Membership

Abstract: This paper investigates the impact of renewable energy sources (RESs), CO2 emissions, macroeconomics, and the political stability in a country on the Gross Domestic Product (GDP). The authors analyse the dynamics of RESs use, CO2 emissions, and GDP development and also test the following hypotheses: (1) The country’s economic growth is related to the energy consumption, in terms of both human resources and capital; (2) the share of the renewable energy consumption of the total energy consumption has a positive impact on the economic growth; and (3) the share of the renewable energy consumption of the total energy consumption is unrelated to the economic growth. To test the above hypotheses, the authors use the modified Cobb-Douglas production function, which also considers RES production volumes, CO2 emissions, and economic growth. The study employs data between 1995 to 2015 from the candidate and potential candidate countries for the EU membership. The data are drawn from the World Bank and Eurostat. The analyses entail panel unit root tests, Pedroni panel cointegration tests, fully modified OLS (FMOLS), dynamic OLS (DOLS) panel cointegration techniques, and the Vector Error Correction model (VECM). The findings confirm the relationship between RESs, CO2 emissions, and the GDP. For the EU countries, RESs as human resources and capital have an impact on the GDP. Moreover, the results reveal a correction retraction when the economic growth leads to an increase in renewable energy consumption. The investigation also finds that candidate and potential candidate countries for the EU membership should foster renewable energy development. The authors conclude that developing affordable and effective instruments and mechanisms to boost the RES implementation is necessary to decrease the anthropogenic impact on the environment (in particular, decreasing CO2 emissions) without any attendant reduction in the economic growth.

The nexus of renewable and nonrenewable energy consumption, trade openness, and CO2 emissions in the framework of EKC: evidence from emerging economies.

Abstract: Emerging economies are experiencing considerable economic changes due to change in energy demand and CO2 emissions. To explore the link between energy demand and CO2 emissions, this study disaggregates energy consumption into renewable and nonrenewable, and investigates its impact on carbon (CO2) emissions by incorporating the role of trade openness using the environment Kuznets curve (EKC) framework. Emerging economies from 1990 to 2015 are examined based on Morgan Stanley Capital International's (MSCI's) classification. This empirical study uses cross-sectional dependence (CD) test and second-generation panel unit root test for precise estimation. The Pedroni and Westerlund panel cointegration tests are used to examine the long-run equilibrium. Continuously updated fully modified (CUP-FM) and continuously updated bias-corrected (CUP-BC) approaches are applied to investigate long-run output elasticities while the vector error correction model (VECM) is used to examine the direction of causal relationships among the variables. The results show that renewable energy consumption affects the CO2 emissions negatively while nonrenewable energy consumption positively impacts the CO2 emissions. The study also supports the EKC hypothesis. Trade openness adversely affects the CO2 emissions which are an imperative inclination of these economies towards globalization. Moreover, in the long run, energy consumption from renewable energy and economic growth Granger cause CO2 emission, nonrenewable energy, and trade openness. In the short run, renewable energy Granger causes economic growth, while economic growth Granger causes nonrenewable energy. The study offers some vital policy suggestions for these emerging economies and some interesting lessons for the developing economies.

New insights into an old issue – examining the influence of tourism on economic growth: evidence from selected small island developing states

Abstract: This paper uses relatively new heterogeneous panel autoregressive distributed lag cointegration methods to re-examine the long-run equilibrium and Granger causality relationship between tourism and economic growth for the small island developing states (SIDSs). In addition, the study incorporates energy consumption and foreign direct investment (FDI) as alternative growth determinants, during the period 1995–2014. After allowing for the heterogeneous country effect, a positive and statistically significant long-run equilibrium relationship between tourism, energy consumption, FDI, and gross domestic product, with a moderate convergence rate towards the long-run path is confirmed. The panel Granger causality test as proposed by Dumitrescu and Hurlin [(2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450–1460.] shows bidirectional causality running from tourism to economic growth, from tourism to energy consumption and from energy consumption to economic growth, ...

Trade Openness and Carbon Emissions: Evidence from Belt and Road Countries

Abstract: The search for a green and low-carbon economy has been a guide to current energy and environmental research. Using current panel cointegration approaches, our study examines the interaction between trade and an environmental pollution proxy of carbon dioxide (CO2) emissions by integrating economic growth and energy usage as major potential determining factors in this relationship for 49 high-emission countries in Belt and Road regions over the period of 1991–2014. For a robust analysis, we further grouped these countries into income panels (high, middle, low) and various regions (East Asia, Southeast Asia, Central Asia, South Asia, the Middle East/Africa, and Europe). The results of the panel cointegration tests revealed that the four variables were stationary in the long run. Similarly, our panel results indicated that trade openness had both positive and negative impacts on environmental pollution, but the effect varied in these different groups of nations. The results of the vector error correction model (VECM) causality also showed a long-run causal effect between trade, economic growth, energy consumption, and environmental pollution in the Belt and Road, Europe, high-income, middle-income, and low-income panels. The environmental Kuznets curve (EKC) results further indicated the existence of an inverted U-form relationship between trade and carbon emissions. Finally, certain policy implications are discussed.