IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v17y2025i1p269-d1558832.html
   My bibliography  Save this article

The Impact of Economic Policy Uncertainty and Geopolitical Risk on Environmental Quality: An Analysis of the Environmental Kuznets Curve Hypothesis with the Novel QRPD Approach

Author

Listed:
  • Ibrahim Cutcu

    (Department of Economics, Hasan Kalyoncu University, Gaziantep 27000, Türkiye)

  • Ali Altiner

    (Department of Economics, Recep Tayyip Erdoğan University, Rize 53100, Türkiye)

  • Eda Bozkurt

    (Department of Foreign Trade, Ataturk University, Erzurum 25240, Türkiye)

Abstract

This study aimed to determine the impact of economic policy uncertainty and geopolitical risk on environmental quality in 17 selected countries. In addition, it also aimed to test the environmental Kuznets curve hypothesis (EKC) within the scope of the determined variables and model. In this context, analyses were carried out with annual data for the period 1997–2022, based on the country group for which the economic policy uncertainty index was calculated, subject to data limitations. In this study, a Quantile Regression of Panel Data (QRPD) analysis, OLS (Ordinary Least Squares), and a panel causality test were used. As a result of the estimation with the Quantile Regression of Panel Data (QRPD), it was found that the increase in economic policy uncertainty had a positive effect on environmental quality in most of the quantiles, while geopolitical risk had significant and negative effects on environmental quality in the medium and high quantiles. The validity of the EKC hypothesis was also proved in the analysis. According to the results of the panel causality test, there was a bidirectional causality relationship between environmental quality and all the independent variables, except the square of economic growth. In order to make a comparison with the new-generation estimation method, QRPD, it was observed that the estimation results with the classical regression method, OLS, were similar. In light of these findings, it is recommended that policy makers pursue strategies that balance economic growth and environmental quality, reduce the environmental impacts of geopolitical risks, and favor a renewable energy transition. Moreover, long-term and stable environmental policies have a crucial role in the success of these strategies.

Suggested Citation

  • Ibrahim Cutcu & Ali Altiner & Eda Bozkurt, 2025. "The Impact of Economic Policy Uncertainty and Geopolitical Risk on Environmental Quality: An Analysis of the Environmental Kuznets Curve Hypothesis with the Novel QRPD Approach," Sustainability, MDPI, vol. 17(1), pages 1-24, January.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:1:p:269-:d:1558832
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/17/1/269/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/17/1/269/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
    2. Muhammad Sadiq & Syed Tauseef Hassan & Irfan Khan & Mohammad Mafizur Rahman, 2024. "Policy uncertainty, renewable energy, corruption and CO2 emissions nexus in BRICS-1 countries: a panel CS-ARDL approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 21595-21621, August.
    3. Makarov, Igor & Alataş, Sedat, 2024. "Production- and consumption-based emissions in carbon exporters and importers: A large panel data analysis for the EKC hypothesis," Applied Energy, Elsevier, vol. 363(C).
    4. Tenaw, Dagmawe & Beyene, Abebe D., 2021. "Environmental sustainability and economic development in sub-Saharan Africa: A modified EKC hypothesis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).
    5. Nguyen, Thanh Cong, 2021. "Economic policy uncertainty and bank stability: Does bank regulation and supervision matter in major European economies?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    6. 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.
    7. Wensheng Kang & Ronald A. Ratti & Joaquin Vespignani, 2020. "Impact of global uncertainty on the global economy and large developed and developing economies," Applied Economics, Taylor & Francis Journals, vol. 52(22), pages 2392-2407, May.
    8. Hang Su & Yong Geng & Xi-Qiang Xia & Quan-Jing Wang, 2022. "Economic Policy Uncertainty, Social Development, Political Regimes and Environmental Quality," IJERPH, MDPI, vol. 19(4), pages 1-15, February.
    9. Muhammad Shahbaz & Smile Dube & Ilhan Ozturk & Abdul Jalil, 2015. "Testing the Environmental Kuznets Curve Hypothesis in Portugal," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 475-481.
    10. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    11. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    12. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    13. Yu, Yang & Jian, Xin & Wang, Hongxiang & Jahanger, Atif & Balsalobre-Lorente, Daniel, 2024. "Unraveling the nexus: China's economic policy uncertainty and carbon emission efficiency through advanced multivariate quantile-on-quantile regression analysis," Energy Policy, Elsevier, vol. 188(C).
    14. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    15. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 239-253.
    16. Chen, Zhao & Kahn, Matthew E. & Liu, Yu & Wang, Zhi, 2018. "The consequences of spatially differentiated water pollution regulation in China," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 468-485.
    17. Bashir, Muhammad Farhan & Shahbaz, Muhammad & Malik, Muhammad Nasir & Ma, Beiling & Wang, Jianming, 2023. "Energy transition, natural resource consumption and environmental degradation: The role of geopolitical risk in sustainable development," Resources Policy, Elsevier, vol. 85(PA).
    18. He, Feng & Ma, Yaming & Zhang, Xiaojie, 2020. "How does economic policy uncertainty affect corporate Innovation?–Evidence from China listed companies," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 225-239.
    19. Levenko, Natalia, 2020. "Perceived uncertainty as a key driver of household saving," International Review of Economics & Finance, Elsevier, vol. 65(C), pages 126-145.
    20. Kyle Handley & Nuno Limão, 2018. "Trade and Investment under Policy Uncertainty: Theory and Firm Evidence," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 4, pages 89-122, World Scientific Publishing Co. Pte. Ltd..
    21. Das, Debojyoti & Kannadhasan, M. & Bhattacharyya, Malay, 2019. "Do the emerging stock markets react to international economic policy uncertainty, geopolitical risk and financial stress alike?," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 1-19.
    22. Adediran, Idris A. & Swaray, Raymond, 2023. "Carbon trading amidst global uncertainty: The role of policy and geopolitical uncertainty," Economic Modelling, Elsevier, vol. 123(C).
    23. David Powell, 2022. "Quantile regression with nonadditive fixed effects," Empirical Economics, Springer, vol. 63(5), pages 2675-2691, November.
    24. Haider Mahmood & Amira Houaneb, 2023. "The Environmental Kuznets Curve Hypothesis in the United States: A Review," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 397-403, November.
    25. Phan, Dinh Hoang Bach & Iyke, Bernard Njindan & Sharma, Susan Sunila & Affandi, Yoga, 2021. "Economic policy uncertainty and financial stability–Is there a relation?," Economic Modelling, Elsevier, vol. 94(C), pages 1018-1029.
    26. Adams, Samuel & Adedoyin, Festus & Olaniran, Eniola & Bekun, Festus Victor, 2020. "Energy consumption, economic policy uncertainty and carbon emissions; causality evidence from resource rich economies," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 179-190.
    27. Tomiwa Sunday Adebayo & Seyi Saint Akadiri & Joshua Sunday Riti & Ada Tony Odu, 2023. "Interaction among geopolitical risk, trade openness, economic growth, carbon emissions and Its implication on climate change in india," Energy & Environment, , vol. 34(5), pages 1305-1326, August.
    28. Du, Yuqiu & Wang, Wendi, 2023. "The role of green financing, agriculture development, geopolitical risk, and natural resource on environmental pollution in China," Resources Policy, Elsevier, vol. 82(C).
    29. Huseyin Gulen & Mihai Ion, 2016. "Editor's Choice Policy Uncertainty and Corporate Investment," The Review of Financial Studies, Society for Financial Studies, vol. 29(3), pages 523-564.
    30. Atsu, Francis & Adams, Samuel, 2021. "Energy consumption, finance, and climate change: Does policy uncertainty matter?," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 490-501.
    31. Aslan, Alper & Ilhan, Ozturk & Usama, Al-Mulali & Savranlar, Buket & Polat, Melike Atay & Metawa, Noura & Raboshuk, Alina, 2024. "Effect of economic policy uncertainty on CO2 with the discrimination of renewable and non renewable energy consumption," Energy, Elsevier, vol. 291(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dao, Ngoc Bich & Truong, Huong Hoang Diep & Shahbaz, Muhammad & Chu, Lan Khanh, 2024. "The impacts of natural resources rents diversification, uncertainty, and environmental technologies on ecological sustainability: Empirical evidence from OECD countries," Resources Policy, Elsevier, vol. 91(C).
    2. Qamruzzaman, Md & Karim, Salma & Jahan, Ishrat, 2022. "Nexus between economic policy uncertainty, foreign direct investment, government debt and renewable energy consumption in 13 top oil importing nations: Evidence from the symmetric and asymmetric inves," Renewable Energy, Elsevier, vol. 195(C), pages 121-136.
    3. Muhammad Sadiq & Syed Tauseef Hassan & Irfan Khan & Mohammad Mafizur Rahman, 2024. "Policy uncertainty, renewable energy, corruption and CO2 emissions nexus in BRICS-1 countries: a panel CS-ARDL approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 21595-21621, August.
    4. Muhammad Khalid Anser & Qasim Raza Syed & Hooi Hooi Lean & Andrew Adewale Alola & Munir Ahmad, 2021. "Do Economic Policy Uncertainty and Geopolitical Risk Lead to Environmental Degradation? Evidence from Emerging Economies," Sustainability, MDPI, vol. 13(11), pages 1-15, May.
    5. Yifei Li & Yuhang Bai, 2023. "Research on the Impact of Global Economic Policy Uncertainty on Manufacturing: Evidence from China, the United States, and the European Union," Sustainability, MDPI, vol. 15(14), pages 1-18, July.
    6. Chen, Limei & Gozgor, Giray & Mahalik, Mantu Kumar & Pal, Shreya & Rather, Kashif Nesar, 2023. "How does geopolitical risk affect CO2 emissions? The role of natural resource rents," Resources Policy, Elsevier, vol. 87(PB).
    7. Hussein Moghaddam & Robert M. Kunst, 2023. "The Role of Natural Gas in Mitigating Greenhouse Gas Emissions: The Environmental Kuznets Curve Hypothesis for Major Gas-Producing Countries," Sustainability, MDPI, vol. 15(5), pages 1-20, February.
    8. Hoang, Dung Phuong & Chu, Lan Khanh & To, Trung Thanh, 2023. "How do economic policy uncertainty, geopolitical risk, and natural resources rents affect economic complexity? Evidence from advanced and emerging market economies," Resources Policy, Elsevier, vol. 85(PA).
    9. Riti, Joshua Sunday & Shu, Yang & Riti, Miriam-Kamah J., 2022. "Geopolitical risk and environmental degradation in BRICS: Aggregation bias and policy inference," Energy Policy, Elsevier, vol. 166(C).
    10. Tunahan Hacıimamoğlu & Vedat Cengiz, 2024. "Are Natural Resource Rents and Renewable Energy Consumption Solutions for Environmental Degradation? Fresh Insights from a Modified Ecological Footprint Model," Sustainability, MDPI, vol. 16(7), pages 1-20, March.
    11. Gong, Xue & Aslam, Muhammad Umar, 2024. "The role of natural resources, and economic development in evaluating the environmental effects of biofuel and waste energy generation in the group of BRICS," Applied Energy, Elsevier, vol. 372(C).
    12. Shabir, Mohsin & Jiang, Ping & Shahab, Yasir & Wang, Peng, 2023. "Geopolitical, economic uncertainty and bank risk: Do CEO power and board strength matter?," International Review of Financial Analysis, Elsevier, vol. 87(C).
    13. Ahakwa, Isaac & Xu, Yi & Tackie, Evelyn Agba & Odai, Leslie Afotey & Sarpong, Francis Atta & Korankye, Benard & Ofori, Elvis Kwame, 2023. "Do natural resources and green technological innovation matter in addressing environmental degradation? Evidence from panel models robust to cross-sectional dependence and slope heterogeneity," Resources Policy, Elsevier, vol. 85(PB).
    14. Ferhat Pehlivanoğlu & Saffet Akdağ & Andrew Adewale Alola, 2021. "The causal nexus of geopolitical risks, consumer and producer confidence indexes: evidence from selected economies," Quality & Quantity: International Journal of Methodology, Springer, vol. 55(4), pages 1261-1273, August.
    15. Selahattin Güriş & Sevcan Çağlayan, 2023. "Co2 Emisyonlarını Etkileyen Faktörlerin Zamanla Değişen Katsayılı Parametrik Olmayan Panel Veri Modelleri ile Analizi," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(39), pages 76-88, December.
    16. Ferreira, João J. & Gomes, Sofia & Lopes, João M. & Zhang, Justin Z., 2023. "Ticking time bombs: The MENA and SSA regions' geopolitical risks," Resources Policy, Elsevier, vol. 85(PA).
    17. Safi, Adnan & Haseeb, Muhammad & Islam, Madeeha & Umar, Muhammad, 2023. "Can sustainable resource management overcome geopolitical risk?," Resources Policy, Elsevier, vol. 87(PB).
    18. Zhao, Yunying & Wang, Wenju & Liang, Zhentang & Luo, Peng, 2024. "Racing towards zero carbon: Unraveling the interplay between natural resource rents, green innovation, geopolitical risk and environmental pollution in BRICS countries," Resources Policy, Elsevier, vol. 88(C).
    19. Feng, Yanchao & Pan, Yuxi & Lu, Shan & Shi, Jiaxin, 2024. "Identifying the multiple nexus between geopolitical risk, energy resilience, and carbon emissions: Evidence from global data," Technological Forecasting and Social Change, Elsevier, vol. 208(C).
    20. Jahanger, Atif & Yu, Yang & Hossain, Mohammad Razib & Murshed, Muntasir & Balsalobre-Lorente, Daniel & Khan, Uzma, 2022. "Going away or going green in NAFTA nations? Linking natural resources, energy utilization, and environmental sustainability through the lens of the EKC hypothesis," Resources Policy, Elsevier, vol. 79(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:17:y:2025:i:1:p:269-:d:1558832. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.