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The environmental Kuzents Curve and the role of coal consumption in India: cointegration and causality analysis in an open economy

Tiwari, Aviral Kumar and Muhammad, Shahbaz (2012): The environmental Kuzents Curve and the role of coal consumption in India: cointegration and causality analysis in an open economy.

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Abstract

This study investigates the dynamic relationship between coal consumption, economic growth, trade openness and CO2 emissions for Indian economy. In doing so, Narayan and Pop structural break unit test is applied to test the order of integration of the variables. Long run relationship between the variables is tested by applying ARDL bounds testing approach to cointegration developed by Pesaran et al. (2001).

The results confirm the existence of cointegration for long run between coal consumption, economic growth, trade openness and CO2 emissions. Our empirical exercise indicates the presence of Environmental Kuznets Curve (EKC) long run as well as short run. Coal consumption as well as trade openness contributes to CO2 emissions. The causality results report the feedback hypothesis between economic growth and CO2 emissions and same inference is drawn between coal consumption and CO2 emissions. Moreover, trade openness Granger causes economic growth, coal consumption and CO2 emissions.

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