CO2 Emissions, Trade Openness and GDP Percapita : Bangladesh Perspective

In recent decades, the relationship between international trade, environmental problems and growth remains controversial topics for the economic literature. This paper mainly deals with the interactions among these three key issues of Bangladesh economy. Johansen’s cointegrating methods have been used to analyze the interaction. Estimation shows one cointegrating vector exists in the model. Findings suggest that the adjustment speed is faster for trade openness while CO2 emissions and GDP per capita have slow adjustment speed of restoration towards the long-run equilibrium. Granger causality test indicates the apparent bidirectional causal link between trade openness and GDP per capita but no causal link has been found from trade openness to CO2 emissions and from GDP per capita to CO2 emissions in both short run and long-run. Except GDP per capita and trade there are other factors which cause these emissions, such as population, but they are not included in the present model. The overall estimation implies that the current situation needs to draw attention to lower the existing emissions without blaming the international trade relations for causing CO2 emissions and focus more on the growth performance to increase the GDP per capita.