The CO2-Growth Nexus Revisited: A Nonparametric Analysis for G7 Economies over Nearly Two Centuries

Posted: 19 May 2017

See all articles by Muhammad Shahbaz

Muhammad Shahbaz

Comsats University Islamabad

Muhammad Shafiullah

University of Nottingham Malaysia Campus

Vassilios G. Papavassiliou

University College Dublin (UCD) - Michael Smurfit Graduate School of Business; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Shawkat M. Hammoudeh

Montpellier Business School; Drexel University - Lebow College of Business

Date Written: May 18, 2017

Abstract

Using a long dataset and some recently popularized nonparametric econometric techniques, this study revisits the nexus between economic growth and carbon dioxide (CO2) emissions for the G7 countries over nearly two centuries. The use of nonparametric modelling is warranted by the fact that long historical time series are often subject to structural breaks and other forms of nonlinearity over the course of time. We employ nonparametric cointegration and causality tests along with the cross-validated Local Linear regression analysis and validate the existence of the environmental Kuznets curve in six of the G7 countries – Canada, France, Germany, Italy, U.K. and the U.S. – and the only exception is Japan. Our empirical analysis also finds CO2 emissions and economic growth to be cointegrated and closely interrelated in the Granger sense. Our results are robust and highlight the nonlinear causal relationship between the two variables.

Keywords: G7 Countries; Economic Growth; CO2 Emissions; EKC Hypothesis; Nonparametric Econometrics

JEL Classification: C14; Q5

Suggested Citation

Shahbaz, Muhammad and Shafiullah, Muhammad and Papavassiliou, Vassilios G. and Hammoudeh, Shawkat M., The CO2-Growth Nexus Revisited: A Nonparametric Analysis for G7 Economies over Nearly Two Centuries (May 18, 2017). Energy Economics, Vol. 65, pp. 183-193, 2017. Available at SSRN: https://ssrn.com/abstract=2970753

Muhammad Shahbaz

Comsats University Islamabad ( email )

Park Road
Chak Shahzad
Islamabad, North-West Frontier Province 44000
Pakistan

Muhammad Shafiullah

University of Nottingham Malaysia Campus ( email )

Jalan Broga
Semenyih, 43500
Malaysia

Vassilios G. Papavassiliou (Contact Author)

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin
Ireland

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Shawkat M. Hammoudeh

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Drexel University - Lebow College of Business ( email )

3141 Chestnut Street
Philadelphia, PA 19104
United States
2158956673 (Phone)
2158956975 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/HammoudehS/

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