Symmetric and asymmetric analysis of trade and environment in Pakistan.

Abstract

The study examines how trade influences the environment via the effects of scale, composition, and technique. The study is conducted for Pakistan based on yearly data between 1980 and 2020. The study takes into both symmetric and asymmetric analyses of trade and environment. The symmetric analysis is carried out through the autoregressive distributed lag (ARDL) model. ARDL ignores the nonlinear association between the variables and captures only the linear relationship among variables whereas nonlinear ARDL captures the asymmetry. Results of the symmetric analysis show that scale and composition effect positively contribute to CO2 emission while technique effect is inversely related to CO2 release. Openness to trade accelerates the CO2 discharge. The findings also confirm the presence of the pollution haven proposition. Moreover, natural resource abundance increases emissions while better governance reduces the emission. The asymmetric analysis illustrates that there is a nonlinear association between trade openness and carbon dioxide emission. The rise and decline in trade are found to be positive and insignificant respectively. Moreover, the findings of asymmetric analysis follow the findings of the symmetric analysis in direction. The study suggests that emissions can be reduced by using environment-friendly technology and by improving governance.