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The Environmental cost of Skiing in the Desert? Evidence from Cointegration with unknown Structural breaks in UAE

Shahbaz, Muhammad and Sbia, Rashid and Hamdi, Helmi (2013): The Environmental cost of Skiing in the Desert? Evidence from Cointegration with unknown Structural breaks in UAE.

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Abstract

The present study explores the relationship between economic growth, electricity consumption, urbanization and environmental degradation in case of United Arab Emirates. The study covers the quarter frequency data over the period of 1975-2011. We have applied the ARDL bounds testing approach to examine the long run relationship between the variables in the presence of structural breaks. The VECM Granger causality is applied to investigate the direction of causal relationship between the variables.

Our empirical exercise reported the existence of cointegration among the series in case of United Arab Emirates. Further, we found an inverted U-shaped relationship between economic growth and CO2 emissions i.e. economic growth raises energy emissions initially and declines it after a threshold point of income per capita (EKC exists). Electricity consumption declines CO2 emissions. The relationship between urbanization and CO2 emissions is positive. Exports seem to improve the environmental quality by lowering CO2 emissions in case of UAE. The causality analysis validates the feedback effect between CO2 emissions and electricity consumption. Economic growth and urbanization Granger cause CO2 emissions.

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