Investigating the Interplay of Economy and Environment in the Western Balkan and Neighboring Countries Using Vecm Approach

Abstract

The relationship between economic development and carbon dioxide emissions in the Western Balkans and the neighboring countries has been a subject of significant interest and study. Economic development, which involves increased industrialization, urbanization, trade, household, and energy consumption, is often associated with higher carbon dioxide emissions due to the burning of fossil fuels. Researchers have investigated how various factors such as economic growth, population size, energy mix, and technological advancements influence carbon dioxide emissions in different regions of the world. The purpose of this paper is to investigate the relationship between the carbon dioxide emissions and a set of economic factors which include gross domestic product, trade, household consumption and energy use, using the panel vector error correction model. The analysis includes nine countries from the Western Balkans and the neighboring countries and annual data for the period 2000 – 2019. The research uses panel unit root tests, cointegration testing and estimation of vector error correction model. The model has confirmed that shocks that emerge in gross domestic product, total trade and household consumption increase the carbon dioxide emission in the long-term. The effect from the private (household) consumption is with the highest intensity, compared to other factors. A shock in trade causes a decline in carbon dioxide emissions in the long-term.