Asymmetry in the Environmental Pollution, Economic Development and Petrol Price Relationship: MRS-VAR and Nonlinear Causality Analyses

Özgür Ersin and Melike Bildirici

Journal for Economic Forecasting, 2019, issue 3, 25-50

Abstract: The paper aims at assessing the nonlinear relations among the carbon dioxide (CO2) emissions, petrol prices and the level of economic prosperity in USA and UK for the 18612012 and 1871-2012 periods. By covering one of the largest samples, the paper achieves its novelty through the utilization of the Markov-switching based VAR and Granger causality methodologies to provide important insights regarding the shape of the Environmental Kuznets Curve. The selection of UK and USA is not only based on the availability of the largest data, but also on selecting countries that have gone through the stages of economic development in the sense of Rostow. In addition, the impact of the petrol prices is introduced to the environment-income relation. With this respect, the paper achieves a link between the literature of the regime-switching based business cycles and the environmental economics. The empirical findings of the paper show that: (i) the asymmetric impacts of the economic growth rates on emissions cannot be rejected both for the expansionary and for the 2. The paper also discusses the need of caution due to the shift of production from the developed to the far east - creating a derived demand of world’s environmental degradation.

Keywords: Environment economics; environmental Kuznets curve; nonlinear causality; CO2 emissions; petrol prices (search for similar items in EconPapers)
JEL-codes: B23 C24 C41 O44 Q41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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