Do oil consumption and economic growth intensify environmental degradation? Evidence from developing economies

Alam and Sudharshan Reddy Paramati

Applied Economics, 2015, vol. 47, issue 48, 5186-5203

Abstract: The purpose of this article is to empirically investigate the impact of economic growth, oil consumption, financial development, industrialization and trade openness on carbon dioxide (CO 2 ) emissions, particularly in relation to major oil-consuming developing economies. This study utilizes annual data from 1980 to 2012 on a panel of 18 developing countries. Our empirical analysis employs robust panel cointegration tests and a vector error correction model (VECM) framework. The empirical results of three panel cointegration models suggest that there is a significant long-run equilibrium relationship among economic growth, oil consumption, financial development, industrialization, trade openness and CO 2 emissions. Similarly, results from VECMs show that economic growth, oil consumption and industrialization have a short-run dynamic bidirectional feedback relationship with CO 2 emissions. Long-run (error-correction term) bidirectional causalities are found among CO 2 emissions, economic growth, oil consumption, financial development and trade openness. Our results confirm that economic growth and oil consumption have a significant impact on the CO 2 emissions in developing economies. Hence, the findings of this study have important policy implications for mitigating CO 2 emissions and offering sustainable economic development.

Date: 2015
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DOI: 10.1080/00036846.2015.1044647

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