Location of Repository

Economic Growth, Energy Consumption, Financial Development, International Trade and CO2 Emissions, in Indonesia

By Shahbaz Muhammad, Hye Qazi Muhammad Adnan and Tiwari Aviral Kumar

Abstract

This study examines the linkages among economic growth, energy consumption, financial development, trade openness and CO2 emissions over the period of 1975Q1-2011Q4 in the case of Indonesia. The stationary analysis is performed by using Zivot-Andrews structural break unit root test and the ARDL bounds testing approach for a long run relationship between the series in the presence of structural breaks. The causal relation between the concerned variable is examined by the VECM Granger causality technique and robustness of causal analysis is tested by innovative accounting approach (IAA). Our results confirm that the variables are cointegrated; it means that the long run relationship exists in the presence of structural break stemming in the series. The empirical findings indicate that economic growth and energy consumption increases CO2 emissions, while financial development and trade openness compact it. The VECM causality analysis has shown the feedback hypothesis between energy consumption and CO2 emissions. Economic growth and CO2 emissions are also interrelated i.e. bidirectional causality. Financial development Granger causes CO2 emissions. The study opens up a new policy insights to control the environment from degradation by using energy efficient technologies. Financial development and trade openness can also play their role in improving the environmental quality.

Topics: Q5 - Environmental Economics, Q4 - Energy
Year: 2013
DOI identifier: 10.1016/j.rser.2013.04.009
OAI identifier: oai:mpra.ub.uni-muenchen.de:43272

Suggested articles

Preview


To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.