Exploring the existence of environmental Kuznets curve in the midst of financial development, openness, and foreign direct investment in New Zealand: insights from ARDL bound test.

Abstract

The present research paper tries to explore the existence of the environmental Kuznets curve in New Zealand by taking annual time series data from 1970 to 2017. The study also considers other variables like trade openness, financial development, and foreign direct investment. Depending on the nature of the selected variables, the study has utilized the autoregressive distributed lag(ARDL) model to explore the cointegration among the variables. The result verifies the existence of the long-run cointegration among the variables. Further, it confirms the presence of the environmental Kuznets curve. The estimated result also shows that trade openness, financial development, and foreign direct investment improves the environmental quality. Moreover, to verify the environmental Kuznets curve visually, we have plotted the CO2 emissions and economic growth, and the scatter plot exhibits an inverted U-shaped relationship between CO2 emissions and economic growth. The turnaround point of the plot with a single break is in 1987. These findings give a wide range of policies for economic growth and environmental quality in New Zealand.