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Bounds testing approach to analysis of the environment Kuznets curve hypothesis

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  • Onafowora, Olugbenga A.
  • Owoye, Oluwole

Abstract

This paper examines the long-run and the dynamic temporal relationships between economic growth, energy consumption, population density, trade openness, and carbon dioxide (CO2) emissions in Brazil, China, Egypt, Japan, Mexico, Nigeria, South Korea, and South Africa based on the environment Kuznets curve (EKC) hypothesis. We employ the ARDL Bounds test to cointegration and CUSUM and CUSUMSQ tests to ensure cointegration and parameter stability. The estimated results show that the inverted U-shaped EKC hypothesis holds in Japan and South Korea. In the other six countries, the long-run relationship between economic growth and CO2 emissions follows an N-shaped trajectory and the estimated turning points are much higher than the sample mean. In addition, the results indicate that energy consumption Granger-causes both CO2 emissions and economic growth in all the countries. Our results are consistent with previous studies that show that there is no unique relationship between energy consumption, population density, economic growth, trade openness, and the environment across countries.

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  • Onafowora, Olugbenga A. & Owoye, Oluwole, 2014. "Bounds testing approach to analysis of the environment Kuznets curve hypothesis," Energy Economics, Elsevier, vol. 44(C), pages 47-62.
  • Handle: RePEc:eee:eneeco:v:44:y:2014:i:c:p:47-62
    DOI: 10.1016/j.eneco.2014.03.025
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    Keywords

    Environmental Kuznets curve (EKC); ARDL bounds test; CO2 emissions; Economic growth; Energy consumption;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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