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Revisiting the emissions-energy-trade nexus: Evidence from the newly industrializing

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  • Ahmed, Khalid
  • Shahbaz, Muhammad
  • Kyophilavong, Phouphet

Abstract

This paper applies Pedroni's panel cointegration approach to explore the causal relationship between trade openness, carbon dioxide emissions, energy consumption and economic growth for the panel of newly industrialized economies (i.e. Brazil, India, China and South Africa) over the period of 1970–2013. Our panel cointegration estimation results found majority of the variables cointegrated and confirm the long-run association among the variables. The Granger causality test indicates bi-directional causality between carbon dioxide emissions and energy consumption. A uni-directional causality is found running from trade openness to carbon dioxide emission and energy consumption, and economic growth to carbondioxide emissions. The results of causality analysis suggest that the trade liberalization in newly industrialized economies induces higher energy consumption and carbon dioxide emissions. Furthermore, the causality results are checked using an innovative accounting approach which includes forecast-error variance decomposition test and impulse response function. The long-run coefficients are estimated using fully modified ordinary least square (FMOLS) method and results conclude that the trade openness and economic growth reduce carbon dioxide emissions in the long-run. The results of FMOLS test sound the existence of environmental Kuznets curve hypothesis. It means, trade liberalization induces carbon dioxide emission with increased national output, but it offsets that impact in the long-run with reduced level of carbon dioxide emissions.

Suggested Citation

  • Ahmed, Khalid & Shahbaz, Muhammad & Kyophilavong, Phouphet, 2016. "Revisiting the emissions-energy-trade nexus: Evidence from the newly industrializing," MPRA Paper 68680, University Library of Munich, Germany, revised 05 Jan 2016.
  • Handle: RePEc:pra:mprapa:68680
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    2. repec:eee:eneeco:v:68:y:2017:i:c:p:548-565 is not listed on IDEAS
    3. Ahmed, Khalid, 2015. "The sheer scale of China’s urban renewal and CO2 emissions: Multiple structural breaks, long-run relationship and short-run dynamics," MPRA Paper 71035, University Library of Munich, Germany.
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    5. Njindan Iyke, Bernard & Ho, Sin-Yu, 2017. "Trade Openness and Carbon Emissions: Evidence from Central and Eastern Europe," MPRA Paper 80399, University Library of Munich, Germany.
    6. Ahmed, Khalid & Rehman, Mujeeb Ur & Ozturk, Ilhan, 2017. "What drives carbon dioxide emissions in the long-run? Evidence from selected South Asian Countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 1142-1153.
    7. Balsalobre-Lorente, Daniel & Shahbaz, Muhammad & Roubaud, David & Farhani, Sahbi, 2018. "How economic growth, renewable electricity and natural resources contribute to CO2 emissions?," Energy Policy, Elsevier, vol. 113(C), pages 356-367.
    8. Shahbaz, Muhammad & Solarin, Sakiru Adebola & Hammoudeh, Shawkat & Shahzad, Syed Jawad Hussain, 2017. "Bounds Testing Approach to Analyzing the Environment Kuznets Curve Hypothesis: The Role of Biomass Energy Consumption in the United States with Structural Breaks," MPRA Paper 81840, University Library of Munich, Germany, revised 07 Oct 2017.

    More about this item

    Keywords

    Newly industrialized economies; Gross domestic production (GDP); Carbon dioxide emissions; Trade liberalization; Energy consumption;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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