Does Energy-Growth and Environment Quality Matter for Agriculture Sector in Pakistan or not? An Application of Cointegration Approach

Abstract

The main objective of this paper is to examine the long-term effects of financial development, economic growth, energy consumption (electricity consumption in the agriculture sector), foreign direct investment (FDI), and population on the environmental quality in Pakistan during the period of 1980 to 2016. We use CO2 emissions from the agriculture sector as a proxy indicator for environmental quality. We employ various unit root tests (e.g., ADF, PP, ERS, KPSS) and structural break unit root tests (Z&A, CMR) to check the stationarity and structural break in the data series. Cointegration tests, i.e., Johansen, Engle-Granger, and ARDL cointegration approaches are used to ensure their robustness. Results showed that significant long-term cointegration exists among the variables. Findings also indicated that an increase in financial development and foreign direct investment (FDI) improves environmental quality, whereas the increase in economic growth and electricity consumption in the agriculture sector degrades environmental quality in Pakistan. Based on the findings, we suggest policymakers should provide a conducive environment for foreign investment. Moreover, it is also suggested that a reliance on fossil fuels be reduced and a transition to renewable energy sources be encouraged to decrease the environmental pollution in the country.

Cointegration and Causality Analysis of Dynamic Linkage between Industrial Energy Consumption and Economic Growth in Pakistan

“…Consequently, the non-renewable energy consumption roots are a more indispensable input for industrial and economic progress compared with renewable energy utilization sources. The results of this work are consistent with previous findings in the literature [24,26,[41][42][43][44][45][46][47].…”

Assessing the Impact of Factors Driving Global Carbon Dioxide Emissions

“…The findings of the study showed a stronger impact of the variables on the GDP per capita in the long run than that of in the short run. Similar to the Chandio et al's findings, the researchers suggested that the government should promote the use of renewable energy resources and make proper decision on reducing the CO 2 emissions [28]. One of the controversial debates in environmental economics, which began in the 1980s, is the relationship between environmental pollution and economic growth.…”

“…Chandio, et al [28] conducted a research to examine the long run relationship between the financial development, economic growth, energy consumption in the form of electricity consumption in the agriculture sector, foreign direct investment, and population on the quality of environment in Pakistan during 1980-2016.…”

“…The researchers chose CO 2 emissions from the agriculture sector as a substitute variable representing environmental quality. Chandio et al [28] used various econometric tests (i.e., unit root tests, structural break unit tests, cointegration tests) to determine whether the concepts of stationary, structural break, and robustness of the results could apply to their collected data and the estimates, respectively. After implementing the aforementioned tests, Chandio, et al [28] found a long-term cointegration relationship between the variables.…”

“…Chandio et al [28] used various econometric tests (i.e., unit root tests, structural break unit tests, cointegration tests) to determine whether the concepts of stationary, structural break, and robustness of the results could apply to their collected data and the estimates, respectively. After implementing the aforementioned tests, Chandio, et al [28] found a long-term cointegration relationship between the variables. In addition, the findings of the study showed a positive between foreign direct investment and financial development with environmental quality in Pakistan.…”