The impact of international trade on environmental quality in transition countries: evidence from time series data during 1991-2013

This research presents first empirical time series evidence of the impact of international trade on environmental quality in the case of transition countries. The linkages between international trade and environmental quality are well established both theoretically and empirically in the literature. However, the empirical evidence relating to transition countries is non-existent as far as this study is concerned. Thus, our research aims at filling this gap. To this extent, fifteen transition countries are selected in order to test the impact of international trade on environmental quality. An econometric model between carbon emissions, energy use, income and trade openness is formed. The econometric model was estimated via ARDL approach to cointegration and GMM procedures. The econometric results from both econometric techniques support the existence of the EKC hypothesis only in three transition countries: Estonia, Turkmenistan and Uzbekistan. As for the impact of trade on environmental quality, the econometric results from both techniques vary in different transition countries. To this extent, the displacement hypothesis is validated in the case of Armenia, Estonia, Latvia, Kyrgyzstan, and Russia. The paper also discusses policy implications of the empirical results as well as offering policy recommendations.