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Analyzing the association between Innovation, Economic Growth, and Environment: Divulging the Importance of FDI and Trade Openness in India

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  • Zameer, Hashim
  • Yasmeen, Humaira
  • Zafar, Muhammad Wasif
  • Waheed, Abdul
  • Sinha, Avik

Abstract

The objective of this paper is to explore the nexus of innovation-environment and economic growth in the context of the Indian economy. To achieve the study objective, we explored the role of technological innovation, FDI, trade openness, energy use and economic growth toward carbon emissions. Using the data of 1985-2017, the study employed ARDL bound testing and VECM methods to capture the effects of technological innovation, trade openness, FDI, energy use and economic growth on CO2 emissions. Empirical estimation has confirmed the existence of long-run cointegration. Similarly, in the long-run, it is found that trade openness, energy use and economic growth positively reinforce CO2 emissions. In contrast, technological innovation and FDI negatively reinforce CO2 emissions in the long-run. Further, VECM indicate that the relationship among innovation, trade openness, and energy use is bidirectional in the long-run. Whereas, unidirectional relation has been found that is coming from GDP to carbon emissions, FDI, innovation, trade, and energy use. In the short-run, unidirectional link found which is coming from FDI, innovation, and energy use to carbon emission. However, the association between emissions and trade openness is bidirectional. The conclusions put-forward policy implications that innovation is a way to reduce environmental degradation.

Suggested Citation

  • Zameer, Hashim & Yasmeen, Humaira & Zafar, Muhammad Wasif & Waheed, Abdul & Sinha, Avik, 2020. "Analyzing the association between Innovation, Economic Growth, and Environment: Divulging the Importance of FDI and Trade Openness in India," MPRA Paper 101323, University Library of Munich, Germany, revised 2020.
    • Handle: RePEc:pra:mprapa:101323
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    More about this item

    Keywords

    Innovation; trade; CO2 emissions; growth; environment;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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