Do the international economic endeavors affect CO2 emissions in open economies of South Asia? An empirical examination under nonlinearity

Abstract

Purpose The purpose of this paper to investigate whether trade liberalization and the financial crisis have contributed to altering the pollution level in selected open economies of South Asia in the long run. Design/methodology/approach The study has adopted the panel data framework where results are tested using the generalized method of moments (GMM). The data of five South Asian countries from 1980–2015 have been used for computing results. Findings Owing to the globalization endeavors, the scope of energy consumption and foreign direct investment (FDI) inflows has increased significantly. The outcomes of the study reveal that globalization has significantly intensified the level of carbon emissions in the selected countries. However, the impact of financial crisis on carbon emission is found insignificant in the long run. Therefore, the study reveals that the level of environmental pollution in South Asia economies is more sensitive to positive economic variations than negative. Originality/value Earlier studies have ignored the parallel effect of globalization and financial meltdown on carbon emissions in a country or region. Stating differently, the present study intends to capture the impact of positive (globalization) and negative (financial crisis) global economic movements on carbon emissions in the five open economies. The majority of studies in the past have focused on the relationship between positive economic endeavors and environmental pollution. Furthermore, the study recommends that while framing a trade policy, its possible impact on environmental pollution also needs to be considered.