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The Environmental Kuznets Curve: some really disturbing Monte Carlo evidence

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  • T. VERBEKE
  • M. DE CLERCQ

Abstract

The Environmental Kuznets Curve hypothesis posits an inverse U- shaped relation between environmental pollution and income. The empirical literature has largely ignored the time series properties of the data used to test the EKC. This paper uses Monte Carlo experiments to analyse whether the order of integration influences the EKC empirical strategy. We show that if the variables used are I(1), the results will spuriously confirm the EKC hypothesis in 40% of the cases. Furthermore, accepting the EKC also influences the critical values for the rejection of no cointegration in the Engle- Granger framework.

Suggested Citation

  • T. Verbeke & M. De Clercq, 2004. "The Environmental Kuznets Curve: some really disturbing Monte Carlo evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/242, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:04/242
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    References listed on IDEAS

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    More about this item

    Keywords

    Environmental Kuznets Curve Hypothesis; I(1); cointegration; monte carlo;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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