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The CO2–growth nexus revisited: A nonparametric analysis for the G7 economies over nearly two centuries

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  • Shahbaz, Muhammad
  • Shafiullah, Muhammad
  • Papavassiliou, Vassilios G.
  • Hammoudeh, Shawkat

Abstract

Using a long dataset and some recently popularized nonparametric econometric techniques, this study revisits the nexus between economic growth and carbon dioxide (CO2) emissions for the G7 countries over nearly two centuries. The use of nonparametric modelling is warranted by the fact that long historical time series are often subject to structural breaks and other forms of nonlinearity over the course of time. We employ nonparametric cointegration and causality tests along with the cross-validated Local Linear regression analysis and validate the existence of the environmental Kuznets curve in six of the G7 countries – Canada, France, Germany, Italy, U.K. and the U.S. – and the only exception is Japan. Our empirical analysis also finds CO2 emissions and economic growth to be cointegrated and closely interrelated in the Granger sense. Our results are robust and highlight the nonlinear causal relationship between the two variables.

Suggested Citation

  • Shahbaz, Muhammad & Shafiullah, Muhammad & Papavassiliou, Vassilios G. & Hammoudeh, Shawkat, 2017. "The CO2–growth nexus revisited: A nonparametric analysis for the G7 economies over nearly two centuries," Energy Economics, Elsevier, vol. 65(C), pages 183-193.
  • Handle: RePEc:eee:eneeco:v:65:y:2017:i:c:p:183-193
    DOI: 10.1016/j.eneco.2017.05.007
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    Cited by:

    1. Shahbaz, Muhammad & Nasir, Muhammad Ali & Roubaud, David, 2018. "Environmental Degradation in France: The Effects of FDI, Financial Development, and Energy Innovations," MPRA Paper 88195, University Library of Munich, Germany, revised 16 Jul 2018.
    2. Fujii, Hidemichi & Iwata, Kazuyuki & Chapman, Andrew & Kagawa, Shigemi & Managi, Shunsuke, 2018. "An Analysis of Urban Environmental Kuznets Curve of CO2 Emissions: Empirical Analysis of 276 Global Metropolitan Areas," MPRA Paper 87859, University Library of Munich, Germany.

    More about this item

    Keywords

    G7 countries; Economic growth; CO2 emissions; EKC hypothesis; Nonparametric econometrics;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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