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Short and Long-Run Causal Effects of CO 2 Emissions, Energy Use, GDP and Population Growth: Evidence from India Using the ARDL and VECM Approaches

Author

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  • Duraisamy Pachiyappan

    (Department of Statistics, Periyar University, Salem 636011, Tamil Nadu, India)

  • Yasmeen Ansari

    (Department of Finance, College of Administrative and Financial Sciences, Saudi Electronic University, Jeddah 24212, Saudi Arabia)

  • Md Shabbir Alam

    (Department of Economics & Finance, College of Business Administration, University of Bahrain, Sakhir 32038, Bahrain)

  • Prabha Thoudam

    (Department of Business and Information, College of Business, University of Buraimi, Al Buraimi 890, Oman)

  • Kuppusamy Alagirisamy

    (Department of Statistics, Periyar University, Salem 636011, Tamil Nadu, India)

  • Palanisamy Manigandan

    (Department of Statistics, Periyar University, Salem 636011, Tamil Nadu, India)

Abstract

This paper investigates the nexus between CO 2 emissions (CO 2 E), GDP, energy use (ENU), and population growth (PG) in India from 1980–2018 by comparing the “vector error correction” model (VECM) and “auto regressive distributed lag” (ARDL). We applied the unit root test, Johansen multi-variate cointegration, and performed a Variance decomposition analysis using the Cholesky approach. The VECM and ARDL-bound testing approaches to cointegration suggest a long-term equilibrium nexus between GDP, energy use, population growth and CO 2 E. The empirical outcomes show the existence of a long-term equilibrium nexus between the variables. The Granger causality results show that short-term bi-directional causality exists between GDP and ENU, while a uni-directional causality between CO 2 E and GDP, CO 2 E and ENU, CO 2 E and PG, and PG and ENU. Evidence from variance decomposition indicates that 58.4% of the future fluctuations in CO 2 E are due to changes in ENU, 2.8% of the future fluctuations are due to changes in GDP, and 0.43% of the future fluctuations are due to changes in PG. Finally, the ARDL test results indicate that a 1% increase in PG will lead to a 1.4% increase in CO 2 E. Our paper addresses some important policy implications.

Suggested Citation

  • Duraisamy Pachiyappan & Yasmeen Ansari & Md Shabbir Alam & Prabha Thoudam & Kuppusamy Alagirisamy & Palanisamy Manigandan, 2021. "Short and Long-Run Causal Effects of CO 2 Emissions, Energy Use, GDP and Population Growth: Evidence from India Using the ARDL and VECM Approaches," Energies, MDPI, vol. 14(24), pages 1-17, December.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:24:p:8333-:d:699769
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