Empirical verification of causality between CO 2 emissions, energy consumption, foreign direct investment, gross domestic product, and openness of the economy: evidence from India

Sushil Kumar Rai, Abhay Mohan Bembey and Devshree Sarfare

International Journal of Sustainable Economy, 2019, vol. 11, issue 3, 237-257

Abstract: The present paper addresses the issue of causal relationships between CO₂ emissions, energy consumption (EC), foreign direct investment (FDI), gross domestic product (GDP), and openness of the economy in India by employing time-series data for 37 years from 1978 to 2014. The result indicates the existence of the long-run relationship between the considered variables. Further, a strong joint unidirectional causality is running from energy consumption, foreign direct investment, gross domestic product, and openness of the economy to CO₂ emissions. The finding supports the thesis of the causal cyclical relationship between the above-mentioned variables; therefore, the policy of efficient energy use along with the adaptation of new technology in production activity will address the issue of reduction in CO₂ emissions without compromising the objectives of high growth rate through foreign direct investment and openness of the economy.

Keywords: causality; CO 2 emissions; energy consumption; foreign direct investment; FDI; gross domestic product; GDP; openness of the economy; cointegration; vector error correction model; VECM; sustainability. (search for similar items in EconPapers)
Date: 2019
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