The Economic Growth, Energy, Trade, FDI, Exchange Rate, And CO2 Emissions In Turkey. Fresh Evidence From Combined Co-Integration Test

Abstract

This paper examines the effect of economic growth, energy, trade, and FDI on CO2 emissions in Turkey. Also, the prime objective of this paper is to provide a new insight by examining the impact of the real exchange rate (EX) on 〖CO〗_2 emissions by using a new Bayer–Hanck combined co-integration approach. The study covers the period of 1980–2015. The ARDL and FMOLS models are used to test the relationship between the examined variables. The Granger causality test is applied to test the direction of the causality among the examined variables. The findings from FMOLS and ARDL models show that an increase in economic growth, non-renewable energy consumption, and FDI in Turkey led to an increase in Turkey's carbon emissions. Furthermore, the outcomes show that the real exchange rate negatively affects CO2 emissions in Turkey. Additionally, the outcomes confirm that the real exchange rate negatively affects carbon dioxide (CO2) emissions through the channels of energy consumption, FDI, and international trade. It is suggested that Turkey's policymakers should play a significant role in supporting trade, FDI, energy investment projects to lower the level of Co2 emission by employing different economic and monetary policies such as exchange rate policy to reduce environmental degradation.