The asymmetric nexus of energy-growth and CO2 emissions: An empirical evidence based on hidden cointegration analysis

Abstract

Noting the significance of asymmetries in macroeconomic literature, this study aimed to estimate the asymmetric linkages between energy growth and the environment for BRICST countries between 1990 & 2017. For this purpose, this study applied hidden cointegration, panel NARDL, and asymmetric causality tests between the variables. In the first step, the results supported the existence of hidden cointegration between the variables. In the next step, empirical results obtained from panel NARDL results explained that the chosen variables have asymmetric relationships and are highly responsive to macroeconomic shocks. Initially, the positive shocks of energy consumption positively respond to environmental degradation; similarly, the negative shocks also correspond positively to CO2 emissions. In the economic expansion phase, the positive shocks of growth have insignificant, and adverse shocks negatively respond to CO2 emissions in BRICST countries. The results of individual countries along BRICST differ at various levels in response to asymmetric shocks. Different asymmetric causalities between the chosen dimension of variables are explored. From the asymmetric associations between the variables, the study proposes to forecast the energy demand and explore alternative ways to energy resources to shift their fossil energy bases to renewable systems. Similarly, adopting ICT products could make energy efficiency in these countries more productive towards improving environmental quality.