Environmental Quality, Renewable Energy, Trade Openness and Economic Growth: Evidence from Two Groups of Developing Countries

Abstract

The purpose of this study is to examine the short-run and long-run causal relationship between economic growth, renewable energy, trade openness and carbon dioxide emission (CO 2 ) as an indicator of environmental quality for two panels of developing countries including nine Asian developing countries and six European developing countries. A panel vector error correction model (Panel-VECM) causality is employed to investigate causality relation between the variables of interest. The empirical finding of short-run indicates bidirectional causality between GDP and CO 2 emissions and unidirectional causality from renewable energy and trade openness to CO 2 emissions for both Asian and European panels. Furthermore, there is evidence of unidirectional causality from GDP to renewable energy for Asian panel, while for European panel, bidirectional causality exist between renewable energy and GDP.