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The role of trade openness and investment in examining the energy-growth-pollution nexus: Empirical evidence for China and India

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  • Nguyen, Duc Khuong
  • Sévi, Benoît
  • Sjö, Bo
  • Salah Uddin, Gazi

Abstract

Most of the existing literature dealing with the relationship between carbon emissions, energy consumption and economic growth either suffers from ignoring relevant variables such as trade openness or investment, or suffers from using econometric methods that are unable to distinguish between short and long-term causality and are not robust to the degree of integration of time series used for the analysis. This paper suggests using the autoregressive distributed lag (ARDL) approach along with additional explanatory variables such as measures of trade and investment to shed a new light on the link between emissions, energy consumption and income in the two largest and energy-intensive developing economies: China and India. Our results, over the 1971-2009 period, provide evidence that investment plays a major role in shaping the relationship between carbon emissions, energy consumption and income in China while this is not the case in India. Furthermore, trade openness is found to play a key function in the short-term in China but does not contribute to the emissions-energy-growth scenario in India.

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  • Nguyen, Duc Khuong & Sévi, Benoît & Sjö, Bo & Salah Uddin, Gazi, 2015. "The role of trade openness and investment in examining the energy-growth-pollution nexus: Empirical evidence for China and India," MPRA Paper 75769, University Library of Munich, Germany, revised Dec 2016.
    • Handle: RePEc:pra:mprapa:75769
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    Keywords

    Energy; carbon emissions; income; ARDL approach; India; China.;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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