Does political risk undermine environment and economic development in Pakistan? Empirical evidence from China–Pakistan economic corridor

Abstract

China–Pakistan Economic Corridor (CPEC) invests billion in Pakistan’s energy, infrastructure, and other development projects to step toward Eurasia’s economic integration. However, CPEC may exacerbate climate change vulnerabilities for Pakistan’s struggling economy due to potential environmental hazards and consequences. In this context, the current study seeks to examine the impact of political risk on carbon emissions and economic growth in Pakistan while also considering the relevance of trade openness, Chinese outward Foreign Direct Investment , and One Belt One Road policy. To investigate this impact, we use the autoregressive distributed lag technique to cointegration and the fully modified ordinary least squares estimator for robustness results, using data spanning . Our empirical findings reveal that trade openness, FDI, and OBOR policy contribute to pollution and economic growth, but political stability slows the rate of environmental deterioration and increases economic growth. Furthermore, the existence of robust political stability mitigates the negative impacts of FDI and trade openness on the environment, while strong political stability aids the positive effects of FDI and trade openness on economic growth. Also, the findings confirmed that a better political environment promotes economic development while simultaneously lowering carbon emissions. Our results may assist the Government of Pakistan in transforming into a model green initiative in the region.

Assessing the effect of energy consumption and food production from agriculture on environmental degradation in Pakistan: Does institutional quality matter?

“…However, the irregularity of these revolutionary changes has resulted in an unsustainable institutional environment. Pakistan's agricultural performance and environmental quality are falling daily because of the country's weak IQ consequently, appropriate institutional improvements are essential (Ashraf, 2022b; Hassan et al, 2020).…”

“…To ensure the variables in our CO 2 model are not mutually cointegrated, we ran the cointegration test proposed by Phillips and Ouliaris (1990). This method depends on residuals, and its power attributes are increased when testing for cointegration in small datasets (Ashraf, 2022b; Haug, 1992). The states that the factors that do not make up a cointegrating vector under the test are evaluated using the multivariate Phillips–Ouliaris approach (Haug, 1992).…”

“…Pakistan's expanding ecological concerns need more concentration, and enhancing the efficiency of governmental institutions may help reduce pollution. Pakistan's low‐quality institutions are among the worst in developing economies, which negatively affects the country's environmental standing (Ashraf, 2022b; Hassan et al, 2020). Figure 2 displays a graph of the decreasing IQ index in Pakistan.…”

Achieving green environment in Brazil, Russia, India, China, and South Africa economies: Do composite risk index, green innovation, and environmental policy stringency matter?

“…For the past three decades, a great deal of research has looked at the relationship between political risk and CO 2 emissions, but its conclusions have been mixed. For instance, using the autoregressive distributed lag (ARDL) approach, Ashraf (2023) discovered that a more favorable political climate (lower political risk) encourages economic development and reduces carbon emissions in Pakistan over the period 2000–2020. Using the ARDL method, van Vu and Huang (2020) studied the effect of political risk on CO 2 emissions in Vietnam.…”

Assessing the long- and short-run effects of climate change and institutional quality on economic growth in Somalia

“…Islam and Shindaini (2022) found a similar result in Bangladesh. Recently, Ashraf (2023), using the ARDL bound test, revealed that political stability plays a key role in enhancing economic growth in Pakistan. In a cross-country study of Belt and Road Initiative countries, Ashraf (2022) assessed the impact of political instability on economic complexity.…”