CO2 Emissions and Economic Growth of SAARC Countries: Evidence from a Panel VAR Analysis
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Dec 1, 2015
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Abstract
The paper examined the causality in both static and dynamic framework between CO2 emissions and economic growth of SAARC countries over the period 1972-2010 using panel approach. The paper presents the facts obtained on the basis of panel unit root test, panel-co-integration test , panel VECM and Impulse Response functions (IRFs) and Variance decomposition (VDs). IRFs and VDs analysis indicate that CO2 emissions, GDP have positive impact on each other. The result from the application of VECM analysis suggests unidirectional causality running from economic growth to CO2 emissions. The result found contradicts the Environmental Kuznets Curve hypothesis.
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Pandey, S. and Mishra, M. (2015) “CO2 Emissions and Economic Growth of SAARC Countries: Evidence from a Panel VAR Analysis”, World Journal of Applied Economics, 1(2), pp. 23-33. doi: 10.22440/EconWorld.J.2015.1.2.SP.0009.
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References
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Ahmad et al. (2013). CO2 emission, population and industrial growth linkages in selected South Asian Countries: A co-integration Analysis. World Applied Science Journal, 21(4), 615-622.
Banerjee et.al. (2012). Carbon emissions and Environment: Evidence from three selected SAARC countries. Southwest Business and Economic Journal, 1-14.
Barua, A. & Hubacek, K. (2008). Water pollution and economic growth: An Environmental Kuznets Curve analysis at the watershed and state level. International Journal of Ecological Economics and Statistics, 10(W08).
Breitung, J. & Pesaran, M.H. (2005). Units roots and Co-integration in Panels. Discussion Paper Series 1: Economic studies 42 https://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2005/2005_11_30_dkp_42.pdf?__blob=publicationFile.
Daly, H.E. (2005). Economics in a full world. Scientific American, 293(3), 100-107. DOI: 10.1038/scientificamerican0905-100.
Dinda, S. (2004). Environmental Kuznets Curve Hypothesis: A Survey. Ecological Economics, 49( 4), 431-455. DOI: 10.1016/j.ecolecon.2004.02.011.
Dinda, S. et.al. (2000). Air Quality and Economic Growth: An Empirical Study. Ecological Economics, 34, 409-423. DOI: 10.1016/S0921-8009(00)00179-8.
Dinda, S. & Coondoo, D. (2005). Income and emission: A panel data based co-integration analysis. Ecological Economics, 57, 167-181. DOI: 10.1016/j.ecolecon.2005.03.028.
Fodha, M. and Zaghdoud, O. (2010). Economic growth and pollutant emissions in Tunisia: an empirical analysis of the environmental Kuznets curve. Energy Policy, 38, 1150-1156. DOI: 10.1016/j.enpol.2009.11.002.
Galeotti, M. et.al., (2006). Reassessing the Environmental Kuznets Curve for CO2 emissions: A robustness exercise. Ecological Economics, 57, 152-163. DOI: 10.1016/j.ecolecon.2005.03.031.
Gangadharan. L. & Valenzuela, M.R. (2001). Interrelationships between income, health and the environment: extending the Environmental Kuznets Curve hypothesis. Ecological Economics, 36, 513-531. DOI: 10.1016/S0921-8009(00)00250-0.
Ghosh, S. (2010). Examining carbon emissions-economic growth nexus for India: a multivariate co-integration approach. Energy Policy, 38, 2613- 3130. DOI: 10.1016/j.enpol.2010.01.040.
Granados, J.A.T., & Carpintero, O. (2009). Dispelling the smoke: CO2 emissions and economic growth from a global perspective. Working paper, University of Michigan.
Grossman, G. & Krueger, A. (1991). Environmental impacts of a North American free trade agreement. NBER Working Paper, 3914.
Hill, R. J. & Magnani, E. (2000). An exploration of the Conceptual and Empirical Basis of the Environmental Kuznets Curve. School of Economics, University of New South Wales, Sydney, mimeo.
Jha. R., & Bhanumurthy, K.V. (2003). An inverse global environmental Kuznets Curve. Journal of Comparative Economics, 31, 352- 368. DOI: 10.1016/S0147-5967(03)00042-8.
Kashyna, O (2011). Investigating the Environmental Kuznets Curve Hypothesis using Environmental Performance Indices. School of Economics and management, Lund University.
Khajuria. et.al. (2012). Decoupling and Environmental Kuznets Curve for municipal solid waste generation: Evidence from India. International Journal of Environmental Sciences, Vol.2, No. 3.
Kuznets, S. (1955). Economic Growth and Income Inequality. American Economic Review, 49, 1-28.
Maddala, G. S. & Wu, S (1999). A comparative study unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and statistics, 61, 631–652. DOI: 10.1111/1468-0084.61.s1.13.
Menyah, K. & Wolde-Rufeal, Y. (2010). Energy Consumption, pollutants emissions and economic growth in South Africa. Energy Consumption, 32, 1374- 1382. DOI: 10.1016/j.eneco.2010.08.002.
Meadows, D.H. et al. (1972). The Limit to Growth, Universe Books. New York.
Mukherjee, S. and Kathuria, V. (2006). Is Economic Growth Sustainable? Environmental Quality of Indian States After 1991. International Journal of Sustainable Development, Vol. 9(1), 38-60. doi:10.1504/IJSD.2006.010937.
Mythili. G., & Mukherjee, S. (2011). Examining Environmental Kuznets Curve for river effluents in India. Environment Development and Sustainability, 13(3), 627-640. doi:10.1007/s10668-010-9280-6.
Nell, C., & Zimmermann, S. (2011). Summary based on Chapter 12 of Baltagi: Panel Unit Root Tests. Retrieved from http://homepage.univie.ac.at/robert.kunst/pan2011_pres_nell.pdf.
Omotor, D. G., & Orubu, C. O. (2012). Searching for environmental Kuznets curve of some Basics in Africa. Department of Economics, Delta State University, Abraka, Nigeria.
Panayotou, T. (1995). Environmental Degradation at different stages of Economic Development. In Beyond Rio: The Environmental Crisis and Sustainable Livelihoods in the Third World", Ahmed, I. and J. A. Doeleman (Eds.) ILO Studies Series, St. Martin's Press, New York.
Pao, H.T. & Tsai, C.M. (2011). Multivariate Granger causality between CO2 emissions, energy consumption, FDI and GDP : Evidence from a panel of BRIC countries. Energy 36, 685-693.DOI: 10.1016/j.energy.2010.09.041.
Pedroni, P. (1999). Critical values for Co-integration test in Heterogeneous Panels with Multiple Regressors. Oxford Bulletin of Economics and Statistics, 653-670. DOI: 10.1111/1468-0084.61.s1.14.
Shafik N. and Bandyopadhyay (1992). Economic Growth and Environmental Quality: Time Series and Cross-Country Evidence. World Bank Policy Research Working Paper, WPS 904, Washington DC, World Bank.
Tiwari, A.K (2011). A structural VAR analysis of renewable energy consumption, real GDP and CO2 emissions: evidence from India. Economic Bulletin, 31, 1793-1806.
Unruh, G. C. and Moomaw, W. R. (1998). An Altenative Analysis of Apparent EKC-Type Transitions. Ecological Economics, 25, 221-229. DOI: 10.1016/S0921-8009(97)00182-1.
Vincent, J. R. (1997). Testing For Environmental Kuznets Curves Within a Developing Country. Environmental and Development Economics, 2, 417-431. DOI: 10.1017/S1355770X97000223.
World Bank (2007). Growth and emissions: how do different countries fare. Environmental Department, Washington.
World Bank (2012). World Development Indicators. Washington, DC.
Ahmad et al. (2013). CO2 emission, population and industrial growth linkages in selected South Asian Countries: A co-integration Analysis. World Applied Science Journal, 21(4), 615-622.
Banerjee et.al. (2012). Carbon emissions and Environment: Evidence from three selected SAARC countries. Southwest Business and Economic Journal, 1-14.
Barua, A. & Hubacek, K. (2008). Water pollution and economic growth: An Environmental Kuznets Curve analysis at the watershed and state level. International Journal of Ecological Economics and Statistics, 10(W08).
Breitung, J. & Pesaran, M.H. (2005). Units roots and Co-integration in Panels. Discussion Paper Series 1: Economic studies 42 https://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2005/2005_11_30_dkp_42.pdf?__blob=publicationFile.
Daly, H.E. (2005). Economics in a full world. Scientific American, 293(3), 100-107. DOI: 10.1038/scientificamerican0905-100.
Dinda, S. (2004). Environmental Kuznets Curve Hypothesis: A Survey. Ecological Economics, 49( 4), 431-455. DOI: 10.1016/j.ecolecon.2004.02.011.
Dinda, S. et.al. (2000). Air Quality and Economic Growth: An Empirical Study. Ecological Economics, 34, 409-423. DOI: 10.1016/S0921-8009(00)00179-8.
Dinda, S. & Coondoo, D. (2005). Income and emission: A panel data based co-integration analysis. Ecological Economics, 57, 167-181. DOI: 10.1016/j.ecolecon.2005.03.028.
Fodha, M. and Zaghdoud, O. (2010). Economic growth and pollutant emissions in Tunisia: an empirical analysis of the environmental Kuznets curve. Energy Policy, 38, 1150-1156. DOI: 10.1016/j.enpol.2009.11.002.
Galeotti, M. et.al., (2006). Reassessing the Environmental Kuznets Curve for CO2 emissions: A robustness exercise. Ecological Economics, 57, 152-163. DOI: 10.1016/j.ecolecon.2005.03.031.
Gangadharan. L. & Valenzuela, M.R. (2001). Interrelationships between income, health and the environment: extending the Environmental Kuznets Curve hypothesis. Ecological Economics, 36, 513-531. DOI: 10.1016/S0921-8009(00)00250-0.
Ghosh, S. (2010). Examining carbon emissions-economic growth nexus for India: a multivariate co-integration approach. Energy Policy, 38, 2613- 3130. DOI: 10.1016/j.enpol.2010.01.040.
Granados, J.A.T., & Carpintero, O. (2009). Dispelling the smoke: CO2 emissions and economic growth from a global perspective. Working paper, University of Michigan.
Grossman, G. & Krueger, A. (1991). Environmental impacts of a North American free trade agreement. NBER Working Paper, 3914.
Hill, R. J. & Magnani, E. (2000). An exploration of the Conceptual and Empirical Basis of the Environmental Kuznets Curve. School of Economics, University of New South Wales, Sydney, mimeo.
Jha. R., & Bhanumurthy, K.V. (2003). An inverse global environmental Kuznets Curve. Journal of Comparative Economics, 31, 352- 368. DOI: 10.1016/S0147-5967(03)00042-8.
Kashyna, O (2011). Investigating the Environmental Kuznets Curve Hypothesis using Environmental Performance Indices. School of Economics and management, Lund University.
Khajuria. et.al. (2012). Decoupling and Environmental Kuznets Curve for municipal solid waste generation: Evidence from India. International Journal of Environmental Sciences, Vol.2, No. 3.
Kuznets, S. (1955). Economic Growth and Income Inequality. American Economic Review, 49, 1-28.
Maddala, G. S. & Wu, S (1999). A comparative study unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and statistics, 61, 631–652. DOI: 10.1111/1468-0084.61.s1.13.
Menyah, K. & Wolde-Rufeal, Y. (2010). Energy Consumption, pollutants emissions and economic growth in South Africa. Energy Consumption, 32, 1374- 1382. DOI: 10.1016/j.eneco.2010.08.002.
Meadows, D.H. et al. (1972). The Limit to Growth, Universe Books. New York.
Mukherjee, S. and Kathuria, V. (2006). Is Economic Growth Sustainable? Environmental Quality of Indian States After 1991. International Journal of Sustainable Development, Vol. 9(1), 38-60. doi:10.1504/IJSD.2006.010937.
Mythili. G., & Mukherjee, S. (2011). Examining Environmental Kuznets Curve for river effluents in India. Environment Development and Sustainability, 13(3), 627-640. doi:10.1007/s10668-010-9280-6.
Nell, C., & Zimmermann, S. (2011). Summary based on Chapter 12 of Baltagi: Panel Unit Root Tests. Retrieved from http://homepage.univie.ac.at/robert.kunst/pan2011_pres_nell.pdf.
Omotor, D. G., & Orubu, C. O. (2012). Searching for environmental Kuznets curve of some Basics in Africa. Department of Economics, Delta State University, Abraka, Nigeria.
Panayotou, T. (1995). Environmental Degradation at different stages of Economic Development. In Beyond Rio: The Environmental Crisis and Sustainable Livelihoods in the Third World", Ahmed, I. and J. A. Doeleman (Eds.) ILO Studies Series, St. Martin's Press, New York.
Pao, H.T. & Tsai, C.M. (2011). Multivariate Granger causality between CO2 emissions, energy consumption, FDI and GDP : Evidence from a panel of BRIC countries. Energy 36, 685-693.DOI: 10.1016/j.energy.2010.09.041.
Pedroni, P. (1999). Critical values for Co-integration test in Heterogeneous Panels with Multiple Regressors. Oxford Bulletin of Economics and Statistics, 653-670. DOI: 10.1111/1468-0084.61.s1.14.
Shafik N. and Bandyopadhyay (1992). Economic Growth and Environmental Quality: Time Series and Cross-Country Evidence. World Bank Policy Research Working Paper, WPS 904, Washington DC, World Bank.
Tiwari, A.K (2011). A structural VAR analysis of renewable energy consumption, real GDP and CO2 emissions: evidence from India. Economic Bulletin, 31, 1793-1806.
Unruh, G. C. and Moomaw, W. R. (1998). An Altenative Analysis of Apparent EKC-Type Transitions. Ecological Economics, 25, 221-229. DOI: 10.1016/S0921-8009(97)00182-1.
Vincent, J. R. (1997). Testing For Environmental Kuznets Curves Within a Developing Country. Environmental and Development Economics, 2, 417-431. DOI: 10.1017/S1355770X97000223.
World Bank (2007). Growth and emissions: how do different countries fare. Environmental Department, Washington.
World Bank (2012). World Development Indicators. Washington, DC.