Capturing The Dynamics of Environmental Degradation and Economic Growth in Selected Developing Countries: Using Simultaneous Equation Approach

Abstract

The current study aims to investigate the dynamic nexus between environmental degradation and economic growth in selected developing countries. To analyze the impact of control of corruption as a measure of governance, FDI, renewable energy and urbanization on economic growth and carbon emissions, the simultaneous equation modeling is applied. A panel of 18 selected developing countries for the time period 1995-2022 is taken for empirical verification of the relationship. This study employs descriptive analysis and for diagnostic checking the normality of residual is also tested for the possibility of any model misspecification. Correlation matrix is used to check the degree of multicollinearity among the independent variables. The nature of study indicate the use of simultaneous equation model where economic growth and carbon emission, as a measure of environmental degradation are indigenous variables. The statistical package EVIEWS is used in estimation and obtaining results. In the long run estimation model of CE, URBAN and PG are positively correlated with CE, and GDP, REEC, COC are inversely related to CE in selected developing countries. In model of GDP, CE, FDI and COC are positively correlating with GDP and REEC and PG are negatively affecting the GDP.