ARDL and VECM Investigation of the Environmental Kuznets Curve Hypothesis in Egypt, India, Mexico, Pakistan, Thailand, and Turkey: Financial Development, Globalization, and Government Expenditure Implications for Sustainable Development

Takashi Fukuda
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Takashi Fukuda: Independent researcher, Toroku, Chuo Ward, Kumamoto 8620970, Japan

Energy Technologies and Environment, 2024, vol. 2, issue 2, 29-48

Abstract: The present paper empirically examines the validity of the environmental Kuznets curve (EKC) hypothesis, which posits an inverted U-shaped relationship between CO2 emissions and economic growth, in Egypt, India, Mexico, Pakistan, Thailand, and Turkey for the period 1970-2020. The EKC validity is highly debated due to varying results across countries. This study is significant to addresses this controversy by estimating the EKC's robustness while considering the influence of financial development, globalization, and government expenditure. We employ two cointegration techniques, the autoregressive distributed lag (ARDL) and vector error correction model (VECM), also considering potential structural breaks in the data. Out key findings indicate that the EKC hypothesis is supported in India, Pakistan, and Turkey, with carbon emissions eventually declining after reaching a peak. The hypothesis is not supported in Egypt and Thailand, where emissions rise monotonically with economic growth. In Mexico, the results are mixed, with ARDL suggesting a U-shaped relationship and VECM supporting the EKC. From our empirical analysis of the EKC hypothesis, we derive the following policy implications: 1) countries should adopt comprehensive policy strategies that integrate these goals and fully consider the long-term environmental and societal impacts of their decisions; 2) countries should invest heavily in research and development to accelerate the creation of new technologies that can effectively reduce carbon emissions; and 3) countries must actively raise awareness about the environmental repercussions of economic growth.

Keywords: ARDL; VECM; Environmental Kuznets Curve Hypothesis; Sustainable Development; Emerging Economies (search for similar items in EconPapers)
Date: 2024
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