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Re-examining the Environmental Kuznets Curve Hypothesis in India: The Role of Coal Consumption, Financial Development and Trade Openness

Md Sahnewaz Sanu

Abstract



The objective of this study is to evaluate the effect of GDP growth, coal consumption, financial advancement, and trade openness on CO2 discharges in India for the time span 1971-2017. The present research employs the ARDL bounds test to inspect the long-run cointegrating linkage followed by Granger causality test structured on vector error correction modelling (VECM) techniques to analyse the causal relationship between the variables. The results obtained from the bounds F-statistics confirm the presence of a long-run stable relationship between the variables. The results further demonstrate that GDP growth and coal consumption raise carbon emissions substantially while the financial development and trade openness boost the environmental quality in India. Besides, the findings confirm an inverse quadratic link between economic growth and CO2 discharges, supporting the validity of EKC hypothesis for India. The Granger causality analysis shows bidirectional causality between coal consumption and economic growth, economic growth and CO2 emissions and between coal consumption and CO2 emissions.

Keywords


CO2 emissions, GDP, coal consumption, financial development, trade openness, Environmental Kuznets curve, ARDL, VECM, India.

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