Role of Economic Growth, Financial Development, Trade, Energy and FDI in Environmental Kuznets Curve for Lithuania: Evidence from ARDL Bounds Testing Approach

  • Habib-ur Rahman Bond Business School, Bond University, Australia
  • Ahmad Ghazali Department of Commerce, University of Gujrat, Pakistan
  • Ghulam Ali Bhatti Department of Commerce, University of Gujrat, Pakistan
  • Safdar Ullah Khan Bond Business School, Bond University, Australia
Keywords: CO2 emissions, Financial development, EKC, Trade, Energy, FDI, and ARDL.

Abstract

This paper examines the long-run relationship between carbon dioxide (CO2) emission and economic growth, financial development, trade, energy consumption, and foreign direct investment in the case of Lithuania by employing time series data of 1989-2018. In particular, this paper aims to test whether the Environmental Kuznets Curve (EKC) relationship for economic growth and financial development holds or not. The autoregressive distributed lag (ARDL) bounds testing procedure is employed for the empirical analysis. The results validate the existence of EKC in the long-run as well as in the short-run since there is an inverted U-shaped relation between CO2 emissions and economic growth. Conversely, we could not validate the EKC relationship between CO2 emissions and financial development. Trade and energy consumption are other significant determinants of CO2 emissions. The causality analysis results show that unidirectional causality runs from economic growth to CO2 emissions and trade to CO2 emissions. The validity of the EKC hypothesis indicates that Lithuania can achieve short-term, medium-term, and long-term climate change mitigation and adoption goals and objectives approved by the Parliament of the Republic of Lithuania without deteriorating its economic growth.

Author Biographies

Habib-ur Rahman, Bond Business School, Bond University, Australia

Bond Business School and Casual Lecturer/Tutor.

Bond Business School, Bond University, Gold Coast, QLD 4229, Australia.

Ahmad Ghazali, Department of Commerce, University of Gujrat, Pakistan

Department of Commerce, Lecturer.

Department of Commerce, University of Gujrat, Hafiz Hayat Campus, Gujrat, Pakistan.

Ghulam Ali Bhatti, Department of Commerce, University of Gujrat, Pakistan

Department of Commerce, Associate Professor

Department of Commerce, University of Gujrat, Hafiz Hayat Campus, Gujrat, Pakistan.

Safdar Ullah Khan, Bond Business School, Bond University, Australia

Bond Business School,

Bond University, Gold Coast, QLD 4229, Australia

Published
2020-02-28
Section
ECONOMICS OF ENGINEERING DECISIONS