CO2 Emissions and GDP: A Revisited Kuznets Curve Version via a Panel Threshold MIDAS-VAR Model in Europe for a Recent Period

Sarah Goldman () and Virginia Zhelyazkova ()
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Sarah Goldman: Lux-SIR (Scientific International Research), Luxembourg, Luxembourg, and CRIISEA, University of Picardie, Amiens, France
Virginia Zhelyazkova: VUZF University, Sofia, Bulgaria

Economic Research Guardian, 2023, vol. 13, issue 2, 82-99

Abstract: Since the 2015 Paris Agreements that pledged a global reduction of CO2 emissions, almost all European countries have started to define and implement diverse climate change regulation measures to tackle the tragedy of the commons. In this context, the need to investigate the relationship between CO2 emission and economic growth in terms of GDP has increased for a deeper understanding of macroeconomic developments while applying carbon reduction policies to be reached. The link between growth and CO2 is not obvious and it continues to be widely discussed. The current paper aims to identify the specificities of the relationship between CO2 emissions and GDP growth by applying panel VAR specifications in Europe (for a time span of 1995-2022). We have chosen to introduce two kinds of frequencies. The main result resulted from estimations is the existence of two different thresholds. Unsurprisingly, there is a positive long-term CO2 emission in case of GDP shocks for both regimes. However, regarding the CO2 emissions shocks, regime 1 depicts a continuous decrease in GDP growth whereas in regime 2 there is a continuous rise in GDP. This output reinforces the idea of a non-linear relationship between the CO2 emissions and the GDP.

Keywords: CO2 emissions; Economic growth; Environment Kuznets Curve (EKC); Panel MIDAS-VAR and Thresholds (search for similar items in EconPapers)
JEL-codes: B22 B23 C33 N55 Q48 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:wei:journl:v:13:y:2023:i:2:p:82-99

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