Testing the EKC Hypothesis in Indonesia: Empirical Evidence from the ARDL-Based Bounds and Wavelet Coherence Approaches

Tomiwa Adebayo ()

Asian Journal of Applied Economics/ Applied Economics Journal, 2021, vol. 28, issue 1, 78-100

Abstract: This study aims to explore the long-run and causal effects of energy consumption, trade openness and economic growth on CO2emissions in Indonesia. It employs newly developed econometric techniques using yearly data between 1980 and 2016. To capture long-run effects, the study uses the ARDL estimator, while thewavelet coherence technique is employed to investigate correlationsand causal effects among the variables. The main novelty of the wavelet coherence technique is that it can obtain information on dynamic correlation and/or causality between economic variables at different frequencies andindifferent time periods. The findings from the ARDL long-run and short-run estimates reveal the validity of the environmental Kuznets curve (EKC) hypothesis in Indonesia. Furthermore, both economic growth and energy usage positively trigger CO2emissions, while trade openness enhancesthe environmental quality. The wavelet coherence approach also provides supportive evidence for the ARDL long-run estimate.

Keywords: CO2emissions; economic growth; energy consumption; Wavelet Coherence; Indonesia (search for similar items in EconPapers)
JEL-codes: C32 F64 Q53 Q56 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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