The Dynamic Linkage between CO2 emissions, Economic Growth, Renewable Energy Consumption, Number of Tourist Arrivals and Trade

This study explores the relationship between carbon dioxide (CO2) emissions, economic growth, renewable energy consumption, the number of tourist arrivals and trade in Central and South America spanning the period 1995-2010. We apply panel cointegration techniques and panel Granger causality tests to investigate the relationship across the variables both in the short- and in the long-run. The empirical findings reveal the presence of a long-run relationship across the variables under investigation. Furthermore, short-run dynamics show a unidirectional causality running from renewable energy consumption to CO2 emissions and from renewable energy consumption to trade. In addition, there is a unidirectional short-run causal link without feedback effects from economic growth to trade and the number of tourist arrivals as well as a unidirectional causality running from the number of tourist arrivals to trade. In the long-run, there is evidence of bidirectional causality between emissions, renewable energy consumption and the number of tourist arrivals. Long-run estimates highlight that both the number of tourist arrivals and renewable energy consumption contribute to the reduction of emissions, while both real GDP and trade contribute to the increase of emissions.