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An Empirical Study of the Relationships between CO2 Emissions, Economic Growth and Openness

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  • Choi, Eunho

    () (Korea University)

  • Heshmati, Almas

    () (Jönköping University, Sogang University)

  • Cho, Yongsung

    () (Korea University)

Abstract

This paper investigates the existence of the environmental Kuznets curve (EKC) for carbon dioxide (CO2) emissions and its causal relationships with economic growth and openness by using time series data (1971-2006) from China (an emerging market), Korea (a newly industrialized country), and Japan (a developed country). The sample countries span a whole range of development stages from industrialized to newly industrialized and emerging market economies. The environmental consequences according to openness and economic growth do not show uniform results across the countries. Depending on the national characteristics, the estimated EKC show different temporal patterns. China shows an N-shaped curve while Japan has a U-shaped curve. Such dissimilarities are also found in the relationship between CO2 emissions and openness. In the case of Korea and Japan it represents an inverted U-shaped curve, while China shows a U-shaped curve. We also analyze the dynamic relationships between the variables by adopting a vector auto regression or a vector error correction model. These models through the impulse response functions allow for analysis of the causal variable's influence on the dynamic response of emission variables and it adopts a variance decomposition to explain the magnitude of the forecast error variance determined by the shocks to each of the causal variables over time. Results show evidence of large heterogeneity among the countries and variables impacts.

Suggested Citation

  • Choi, Eunho & Heshmati, Almas & Cho, Yongsung, 2010. "An Empirical Study of the Relationships between CO2 Emissions, Economic Growth and Openness," IZA Discussion Papers 5304, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5304
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    Cited by:

    1. Miomir Jovanović & Ljiljana Kašćelan & Aleksandra Despotović & Vladimir Kašćelan, 2015. "The Impact of Agro-Economic Factors on GHG Emissions: Evidence from European Developing and Advanced Economies," Sustainability, MDPI, Open Access Journal, vol. 7(12), pages 1-21, December.
    2. Shahbaz, Muhammad, 2010. "Does financial instability increase environmental pollution in Pakistan?," MPRA Paper 31360, University Library of Munich, Germany, revised 28 Mar 2011.
    3. André Betzer & Markus Doumet & Ulf Rinne, 2013. "How policy changes affect shareholder wealth: the case of the Fukushima Dai-ichi nuclear disaster," Applied Economics Letters, Taylor & Francis Journals, vol. 20(8), pages 799-803, May.
    4. Stefan Ederer & Stefan Weingärtner, 2014. "Structural Disparities in Carbon Dioxide Consumption and Trade in the World Economy," WIFO Working Papers 478, WIFO.
    5. Erdyas Bimanatya, Traheka & Widodo, Tri, 2017. "Energy Conservation, Fossil Fuel Consumption, CO2 Emission and Economic Growth in Indonesia," MPRA Paper 79989, University Library of Munich, Germany.
    6. Stefan Ederer & Stefan Weingärtner, 2014. "Structural disparities in carbon dioxide consumption and trade in the world economy," WWWforEurope Policy Paper series 16, WWWforEurope.
    7. Azam, Muhammad, 2016. "Does environmental degradation shackle economic growth? A panel data investigation on 11 Asian countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 175-182.
    8. Al Mamun, Md. & Sohag, Kazi & Hannan Mia, Md. Abdul & Salah Uddin, Gazi & Ozturk, Ilhan, 2014. "Regional differences in the dynamic linkage between CO2 emissions, sectoral output and economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1-11.
    9. Mesut Balýbey, 2015. "Relationships among CO2 Emissions, Economic Growth and Foreign Direct Investment and the Environmental Kuznets Curve Hypothesis in Turkey," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 1042-1049.
    10. Zaman, Rubaiya, 2012. "CO2 Emissions, Trade Openness and GDP Percapita : Bangladesh Perspective," MPRA Paper 48515, University Library of Munich, Germany.
    11. Hille, Erik, 2016. "The impact of foreign direct investments on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?," Annual Conference 2016 (Augsburg): Demographic Change 145517, Verein für Socialpolitik / German Economic Association.
    12. repec:gam:jsusta:v:7:y:2015:i:12:p:16290-16310:d:60194 is not listed on IDEAS
    13. Yilmaz BAYAR & Ömer Faruk OZTURK, 2016. "Trade Openness and Environmental Pollution in Emerging Market Economies," Eurasian Eononometrics, Statistics and Emprical Economics Journal, Eurasian Academy Of Sciences, vol. 3(3), pages 33-42, January.

    More about this item

    Keywords

    development; carbon dioxide (CO2); free trade; environmental Kuznets curve (EKC); economic growth;

    JEL classification:

    • 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
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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