The Environmental Kuznets Curve: some really disturbing Monte Carlo evidence
AbstractThe Environmental Kuznets Curve hypothesis posits an inverse U- shaped relation between environmental pollution and income. The empirical literature has largely ignored the time series properties of the data used to test the EKC. This paper uses Monte Carlo experiments to analyse whether the order of integration influences the EKC empirical strategy. We show that if the variables used are I(1), the results will spuriously confirm the EKC hypothesis in 40% of the cases. Furthermore, accepting the EKC also influences the critical values for the rejection of no cointegration in the Engle- Granger framework.
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Bibliographic InfoPaper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/242.
Length: 44 pages
Date of creation: Apr 2004
Date of revision:
Environmental Kuznets Curve Hypothesis; I(1); cointegration; monte carlo;
Find related papers by JEL classification:
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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