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Analysis of the Impact of Economic Policy Uncertainty on Environmental Sustainability in Developed and Developing Economies

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  • Huafang Huang

    (College of Economics and Management, Hefei Normal University, Hefei 230601, China
    School of Geography and Tourism, Anhui Normal University, Wuhu 241002, China)

  • Sharafat Ali

    (Department of Economics, Government Graduate College Kot Sultan, Kot Sultan 31650, Pakistan
    Department of Economics, University of Layyah, Layyah 31200, Pakistan)

  • Yasir Ahmed Solangi

    (College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 210016, China
    School of Management, Jiangsu University, Zhenjiang 212013, China)

Abstract

The literature on the impact of policy uncertainty on climate change has grown rapidly in recent years as policymakers and researchers have become increasingly concerned about the potential adverse effects of policy uncertainty on environmental sustainability. This study aims to investigate the impact of economic policy uncertainty (EPU), GDP per capita, renewable energy consumption (REC), and foreign direct investment (FDI) on environmental sustainability from the perspectives of the environmental Kuznets curve (EKC) and pollution halo/haven hypotheses. The research employs panel data analysis techniques, including panel corrected standard errors (PCSE) and generalized least squares (GLS), to analyze the data from a panel of 19 developed and developing countries from 2001 to 2019. The results reveal that EPU, GDP per capita, REC, and FDI significantly impact GHG emissions, contributing to climate change. The results of the study confirm a U-shaped EKC and pollution haven hypothesis in the selected economies. The findings of this study provide valuable insights for policymakers, as they highlight the need to consider the interplay between economic growth, foreign investment, and environmental policy in addressing climate change. The results also suggest that reducing policy uncertainty and promoting sustainable economic growth can mitigate the effects of climate change and ensure environmental sustainability.

Suggested Citation

  • Huafang Huang & Sharafat Ali & Yasir Ahmed Solangi, 2023. "Analysis of the Impact of Economic Policy Uncertainty on Environmental Sustainability in Developed and Developing Economies," Sustainability, MDPI, vol. 15(7), pages 1-19, March.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:7:p:5860-:d:1109518
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