Asymmetric Effect of Shadow Economy on Environmental Pollution in Egypt: Evidence from Bootstrap NARDL Technique

Awadh Ahmed Mohammed Gamal, Joseph David, Mohd Asri Mohd Noor, Mohd Yahya Mohd Hussin and K.Kuperan Viswanathan
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Awadh Ahmed Mohammed Gamal: Department of Economics, Faculty of Management and Economics, Sultan Idris Education University (UPSI), 35900 Tanjong Malim, Perak Darul Ridzuan, Malaysia
Mohd Asri Mohd Noor: Department of Economics, Faculty of Management and Economics, Sultan Idris Education University (UPSI), 35900 Tanjong Malim, Perak Darul Ridzuan, Malaysia
Mohd Yahya Mohd Hussin: Department of Economics, Faculty of Management and Economics, Sultan Idris Education University (UPSI), 35900 Tanjong Malim, Perak Darul Ridzuan, Malaysia

International Journal of Energy Economics and Policy, 2024, vol. 14, issue 3, 206-215

Abstract: This study examines the asymmetric effect of shadow economy on environmental pollution in Egypt during the 1970 and 2022 period. Using the bootstrap nonlinear autoregressive distributed lag (NARDL) bounds-testing approach, the study presents evidence of nonlinear cointegrating relationship between environmental degradation (carbon emission) and shadow economic activities (alongside globalisation, urbanisation, GDP per capita, and industrial growth). In addition, the results demonstrate that the impact of shadow economy (SE) on environmental pollution (ENV) is nonlinear, with the positive shock in shadow economy promoting environmental degradation and negative shocks promoting environmental quality, both in the short- and long-run. However, the study discovered that the magnitude of the impact of the SE on ENV is larger in the short-run. This is further validated by the dynamic ARDL simulation technique which demonstrates that the immediate effect of the SE on ENV is large. Additionally, the results suggest that income growth, urbanisation, and industrial growth are important drivers of environmental pollution. Therefore, the study recommends the adoption, and most importantly, implementation, of policies and strategies geared towards reducing the shadow economy, and consequently environmental pollution.

Keywords: Shadow Economy; Environmental Pollution; Globalisation; Egypt; Bootstrap NARDL and Dynamic NARDL Simulations (search for similar items in EconPapers)
JEL-codes: C15 C22 O17 Q5 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2024-03-23

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