DECOUPLING CO2 EMISSIONS FROM GDP IN ASEAN-8: A PANEL DATA ANALYSIS

DECOUPLING CO2 EMISSIONS FROM GDP IN ASEAN-8: A PANEL DATA ANALYSIS

by

DR.DEBESH BHOWMIK

INDIAN JOURNAL OF APPLIED BUSINESS AND ECONOMICS

VOLUME-1,NO-1,1-19,2019

Decoupling Co2 Emissions From GDP in Asean-8:

A Panel Data Analysis

Debesh Bhowmik

Retired Principal and Associated with Indian Economic Association and The Indian Econometric Society,

Life member, Bengal Economic Association, Economic Association of Bihar

Email:

debeshbhowmik@rediffmail.com; debeshbhowmik269@gmail.com

Received: 5 January 2019; Revised: 15 February 2019; Accepted: 10 April 2019; Publication: 5 May 2019

Abstract: 

In this paper author attempted to analyze the decoupling hypothesis of CO2 emission from GDP in ASEAN-8 countries during 1980-2016 in panel data which were collected from the World Bank with the assistance of the econometric models of panel fixed effect regression model, Johansen (1988)Fisher (1932) panel cointegration and panel vector error correction model respectively for long run relationship and applied the Wald test (1943) for short run causality. The VEC residual normality test of Hansen Doornik

(1994) residual correlation was used to test normality. After verifying the Hausman test (1978) in the random effect model author used fixed effect panel regression model and found that there is no decoupling because the elasticity is positive and greater than or equal to +1. 0 with respect to GDP, there is absolute decoupling when the elasticity is zero or negative with respect to square of GDP, and there is relative decoupling with respect to

the cube of GDP during the survey period. All are significant at 5% level. Thus, it proves the existence of inverted U shaped Environment Kuznets Curve. Residual cross section dependence test confirmed that there is cross section dependence in the statistic of Breusch Pagan LM(1979) and Pesaran CD (2015) which were rejected at null hypothesis of no cross section dependence (correlation) in residuals. The coefficient diagnostic test assured

that the confidence ellipse is significant at 5% level. The cointegration test suggests that there is long run association among CO2 emissions and the GDP of the ASEAN-8 having two cointegrating equations given by Trace and Max Eigen statistic. From the VECM1 of the system equation, cointegrating

equation2 has been approaching towards equilibrium which implies there is long run causality from GDP of previous period, square

of GDP of previous period, and cube of GDP of previous period to the change of CO2 emissions although it is not significant at 5% level. The speed of adjustment is 0. 73% per year. The similar findings have been observed from other estimated VECM of the system equations. But, there is no short run causality from GDP to CO2 emission in ASEAN-8. Besides, there are both short run and long run causality from GDP, square of GDP and cube of GDP of previous periods to GDP of the given period. In general, VECM is stable but non-stationary, non-normal and serially correlated.

Key Words: CO2 emission, GDP, decoupling, panel cointegration,

panel VECM, short run causality, long run causality

JEL Classification codes: C14, C23, C32, Q01, Q38, Q43, Q52, Q53, Q5

Indian Journal of Applied Economics and Business

Vol. 1, No. 1, 2019

ARF INDIA

Academic Open Access Publishing

www. arfjournals. com

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