Environmental Kuznet’s Curve for Saudi Arabia: An Endogenous Structural Breaks based Cointegration Analysis

Abstract

The study attempts to analyse cointegrating relationship between carbon emissions, energy consumption, income and trade openness in case of Saudi Arabia using the time series data for the period 1971-2011. For this purpose, it uses the ARDL cointegrating technique to find out the long run relationships among the variables. The bounds test results indicate that there exist long- run relationships between the variables. The study also used threshold cointegrating test in order to test the environmental Kuznet’s curve hypothesis in the presence of regime shift. This study confirms existence of cointegrating relationship in case of single structural break, but for two structural break there is no cointegration among the variables. The Environmental Kuznet’s curve hypothesis does not hold in Saudi Arabia. The study does not find long run coefficients statistically significant except for trade openness.