Trade-environment nexus in OIC countries: fresh insights from environmental Kuznets curve using GHG emissions and ecolog
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RESEARCH ARTICLE
Trade-environment nexus in OIC countries: fresh insights from environmental Kuznets curve using GHG emissions and ecological footprint Sajid Ali 1,2 & Zulkornain Yusop 1,3 & Shivee Ranjanee Kaliappan 1 & Lee Chin 1 Received: 20 March 2020 / Accepted: 13 September 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Being closely correlated with income and economic growth, trade openness impacts the environmental quality through different means. The study analyzes the robustness of the environmental Kuznets curve (EKC) hypothesis in OIC countries by examining the extent to which trade openness influence environmental quality through different environmental indicators for the period 1991 to 2018. A new methodology dynamic common correlated effects (DCCE) is applied to resolve the issue of cross-sectional dependence (CSD). We have used greenhouse gas (GHG) emissions, carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) along with ecological footprint as indicators of environmental quality. Results of DCCE estimation identify a negative association of trade openness with CO2, N2O, and CH4, while the positive relationship with the ecological footprint in overall OIC countries and higher income OIC countries. On the other hand, trade openness has a positive association with all environmental indicators in lower income OIC countries. Our findings confirm that inverted-U-shaped EKC exists in all groups of OIC countries when CO2, CH4, and ecological footprint are used as environmental indicators. However, a U-shaped EKC exists in overall OIC countries and lower income OIC countries when N2O is used. Eventually, it is recommended that if OIC countries continue trade openness policies and energy sector reforms and maintain sustainable use of biocapacity; then, they will be able to combat environmental issues with the increase in income. Keywords GHG emissions . Ecological footprint . Trade openness . Environment . Environmental Kuznets curve (EKC) . Cross-sectional dependence (CSD) . DCCE estimation JEL classification F18 . Q56 . Q57
Introduction Today, the world is in favor of trade openness because open economies grow faster (Sachs and Warner 1995), are more productive (Kim and Lin 2009), and have higher per capita GDP (Antweiler et al. 2001) than closed economies. Trade openness Responsible Editor: Eyup Dogan * Sajid Ali [email protected] 1
School of Business and Economics, Universiti Putra, Seri kembangan, Malaysia
2
School of Economics, Bahauddin Zakariya University, Multan, Pakistan
3
Putra Business School, Seri kembangan, Malaysia
may have a negative or positive effect on the environment due to technique, scale, comparative advantage, and composition effects (Grossman and Krueger 1991; Antweiler et al. 2001; Ling et al. 2015; Sahu and Kamboj 2019). Furthermore, trade openness also influences environmental quality via economic growth (Baek and Kim 2011; Ali et al. 2016; Destek et al. 2018). During the growth process, environmental quality first degrades and the
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