Exploring the Existence of the N-shaped Environmental Kuznets Curve in Bangladesh: An Autoregressive Distributed Lag Bounds Test Approach

Abstract

The study aims to explore the existence of the N-shaped Environmental Kuznets Curve (EKC) in Bangladesh. The policy implications for the inverted U-shaped and the N-shaped EKC are different, therefore, it is important to identify the real shape of the EKC for a country for adopting an appropriate policy for mitigating environmental pollution. Although many studies in the context of Bangladesh have explored the inverted U-shaped EKC, none of the study explores the N-shaped EKC. Against this backdrop, the present study has attempted to explore the N-shaped EKC in Bangladesh by using the Autoregressive Distributed Lag (ARDL) Bounds test approach. The study has found that the actual shape of the EKC in Bangladesh is N-shaped for both the short- and long-run. This implies that although higher economic growth mitigates the environmental pollution, but after a certain level of income, the pollution will rise again with the higher level of income per capita. Therefore, policymakers need to reconsider the existing growth promoting policy and adopt a new policy by considering the possibility of this N-shaped EKC.