Do oil consumption and economic growth intensify environmental degradation? Evidence from developing economies

Md Samsul Alam, Sudharshan Reddy Paramati (Lead / Corresponding author)

    Research output: Contribution to journalArticle

    23 Citations (Scopus)

    Abstract

    The purpose of this article is to empirically investigate the impact of economic growth, oil consumption, financial development, industrialization and trade openness on carbon dioxide (CO2) emissions, particularly in relation to major oil-consuming developing economies. This study utilizes annual data from 1980 to 2012 on a panel of 18 developing countries. Our empirical analysis employs robust panel cointegration tests and a vector error correction model (VECM) framework. The empirical results of three panel cointegration models suggest that there is a significant long-run equilibrium relationship among economic growth, oil consumption, financial development, industrialization, trade openness and CO2 emissions. Similarly, results from VECMs show that economic growth, oil consumption and industrialization have a short-run dynamic bidirectional feedback relationship with CO2 emissions. Long-run (error-correction term) bidirectional causalities are found among CO2 emissions, economic growth, oil consumption, financial development and trade openness. Our results confirm that economic growth and oil consumption have a significant impact on the CO2 emissions in developing economies. Hence, the findings of this study have important policy implications for mitigating CO2 emissions and offering sustainable economic development.

    Original languageEnglish
    Pages (from-to)5186-5203
    Number of pages18
    JournalApplied Economics
    Volume47
    Issue number48
    Early online date14 May 2015
    DOIs
    Publication statusPublished - 14 Oct 2015

    Fingerprint

    Oil
    Developing economies
    Economic growth
    Consumption growth
    Environmental degradation
    CO2 emissions
    Financial development
    Industrialization
    Trade openness
    Policy implications
    Economic development
    Empirical analysis
    Causality
    Long-run equilibrium
    Developing countries
    Empirical results
    Carbon dioxide
    Short-run
    Vector error correction model
    Error correction

    Keywords

    • CO<inf>2</inf> emissions
    • developing economies
    • oil consumption
    • panel cointegration techniques

    Cite this

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    AB - The purpose of this article is to empirically investigate the impact of economic growth, oil consumption, financial development, industrialization and trade openness on carbon dioxide (CO2) emissions, particularly in relation to major oil-consuming developing economies. This study utilizes annual data from 1980 to 2012 on a panel of 18 developing countries. Our empirical analysis employs robust panel cointegration tests and a vector error correction model (VECM) framework. The empirical results of three panel cointegration models suggest that there is a significant long-run equilibrium relationship among economic growth, oil consumption, financial development, industrialization, trade openness and CO2 emissions. Similarly, results from VECMs show that economic growth, oil consumption and industrialization have a short-run dynamic bidirectional feedback relationship with CO2 emissions. Long-run (error-correction term) bidirectional causalities are found among CO2 emissions, economic growth, oil consumption, financial development and trade openness. Our results confirm that economic growth and oil consumption have a significant impact on the CO2 emissions in developing economies. Hence, the findings of this study have important policy implications for mitigating CO2 emissions and offering sustainable economic development.

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