Dynamic Economic Analysis between Renewable Energy, Carbon Dioxide Emissions, Trade and GDP based on VECM Granger test and Wavelet Analysis

Meili Liu, Liwei Wang, Chun-Te Lee and Jeng-Eng Lin

Energy and Environment Research, 2022, vol. 12, issue 1, 13

Abstract: In this study, we explored the dynamic economic relationship between Taiwan’s GDP growth, renewable energy consumption, foreign trade openness, and CO2 emissions from 1965 to 2016. Our analysis is based on using updated data to test the existence of Taiwan's EKC model and discuss the causal relationship between CO2 emissions and variables such as GDP growth, renewable energy consumption, and foreign trade opening. We used multicollinearity analysis to test the stationarity of the quadratic form of the EKC model, ADF and KPSS techniques, and Johansen and Juselius cointegration tests and found that there is a long-term equilibrium. By using VECM Granger causality test and wavelet coherence analysis, we further explored the causal relationship between CO2 emissions and other related variables, and found that there is a two-way causal relationship between carbon dioxide emissions and renewable energy consumption in the short term. In addition, from the wavelet correlation analysis of GDP growth and CO2 emissions, it can be seen that 1992 was a turning point in Taiwan’s economic development.

Date: 2022
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