Designing a clean environmental framework for Pakistan: analyzing the nonlinear impact of aggregate demand drivers on CO2 emissions.

Abstract

Aggregate demand in every country is one of the main components of macroeconomics, and Pakistan is no exception. This paper uses a fresh econometric framework to analyze the nonlinear impact of aggregate demand drivers on CO2 emissions in Pakistan by using a nonlinear ARDL approach over the data period from 1975 to 2019. The linear findings reveal that consumption and government expenditure indicates deteriorating effects on carbon emissions in long run in Pakistan. However, nonlinear findings revealed that positive change in government expenditure and trade has positive effects on carbon emissions. The positive change in investment has a negative significant and meaningful effect on the environment in Pakistan and asymmetric findings are also country-specific. Therefore, this study offers a few important policy implications for theorists, academics, and policymakers of Pakistan as well developing economies.