Abstract
AbstractIn this paper, we empirically investigate the causal nexus between economic growth (GDP), CO2 emissions (environmental degradation), financial development, and trade openness using the ordinary least squares technique for a yearly panel data of 40 European economies, during the period of study from 1985 to 2014. To examine this causal link, we utilize the Cobb–Douglas production function. The empirical findings point to a bidirectional Granger causal linkage among GDP and pollution, GDP and financial sector development, GDP and trade openness, financial sector development and trade openness, and trade openness and pollution in the case of European economies. From the causal link between GDP and environmental pollutants, we validate the existence/confirm the validity of the environmental Kuznets curve hypothesis. Also, we confirm/bear out the feedback suggestion of the bidirectional causality among trade openness and financial sector development. Besides, we find the neutrality hypothesis linking c...
Highlights
Over the past two decades, the topic of fundamental link between energy consumption and macroeconomics variables has been examined by many researchers (Fodha & Zaghdoud, 2010; Jamel & Derbali, 2016; Jaunky, 2010; Kahia, Ben Aïssa, & Charfeddine, 2016, 2017; Ozturk & Acaravci, 2010; Saboori, Sulaiman, & Mohd, 2012)
The rest of this study is organized as follow: in Section 2, we show a review of previous literature on the nexus between GDP, financial sector development, CO2 emissions, and trade openness
Data description This study aims at empirically examining the causal link connecting four economic, environmental, and financial aggregates (economic growth (GDP), financial sector development, trade openness, and CO2 emissions) in the European economies during the period of study through 1985–2014
Summary
Over the past two decades, the topic of fundamental link between energy consumption and macroeconomics variables has been examined by many researchers (Fodha & Zaghdoud, 2010; Jamel & Derbali, 2016; Jaunky, 2010; Kahia, Ben Aïssa, & Charfeddine, 2016, 2017; Ozturk & Acaravci, 2010; Saboori, Sulaiman, & Mohd, 2012). Various researchers have been interested in yearly data for several countries by utilizing a diversity of econometric techniques and numerous proxy indicators which have been employed for the causal relationship between CO2, energy consumption, and GDP (Apergis & Payne, 2009; Baranzini, Weber, Bareit, & Mathys, 2013; Ghosh, 2010; Stern, 1993; Wolde-Rufael, 2005; Yuan, Zhao, Yu, & Hu, 2007) Their main empirical conclusions are diverse and have not indicated unique results (Chen, Kuo, & Chen, 2007; Omri, 2014). Their main empirical conclusions are diverse and have not indicated unique results (Chen, Kuo, & Chen, 2007; Omri, 2014). Farhani, Shahbaz, Sbia, and Chaibi (2014) use the procedure of Granger causality test to empirically examine the link between energy consumption and GDP
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