Revisiting the Environmental Kuznets Curve Hypothesis in Pakistanhttps://kiet.edu.pk/marketforces/index.php/marketforces/article/view/446

oleh: Muhammad Zaheer Khan

Format: Article
Diterbitkan: Karachi Institute of Economics and Technology 2021-06-01

Deskripsi

Several studies have already determined an inverted U-shaped Environment Kuznets Curve (EKC) in Pakistan. The existing literature has not considered structural breaks (SBs) in EKC-related studies in Pakistan. This study aims to understand whether SBs explain the EKC hypothesis in Pakistan from 1980-2016. The variables used include total energy consumption (TEC), real GDP per capita, foreign direct investment (FDI), and trade openness (TO). The current study has used conventional time series econometric methods to analyze the issue. A structural break (SB) can significantly impact the forecasting performance of a model. Therefore, we have used the Zivot-Andrews unit root test (ZAURT) with one structural break (SB) and the Gregory-Hansen cointegration test approach for empirical analysis. The Gregory-Hansen cointegration test also suggests that the long-run equilibrium relationship is affected by structural breaks (SBs). Historical data suggests that Pakistan has gone through some structural changes during the period 2000-2004, which includes implementing the structural adjustment program of IMF and liberalization of trade and investment policies to attract foreign investors. The 9/11 tragedy also played an important role as Pakistan remained on the front lines in the war against terrorism. Thus, the study concludes that structural breaks (SBs) have important implications for the EKC hypothesis in Pakistan.