Foreign trade, financial development, agriculture, energy consumption and CO₂ emission: testing EKC among emerging economies

Purpose: The main purpose of this study is to explore the presence of the EKC hypothesis in emerging economies. Additionally, the present study also explores the existence of the “resource curse hypothesis” (RCH), and the causal relationship among the variables that are considered for testing the presence of EKC and RCH hypothesis for a panel of selected emerging economies for the time period between 1990 and 2014.

Design/methodology/approach: The authors performed unit root test followed by cointegration test to test the existence of cointegrating relationship among the variables. Dynamic ordinary least square (DOLS) and fully modified ordinary least square (FMOLS) methods are used to obtain long-run estimates of considered variables, and the Granger causality test is performed to test the directional causality.

Findings: The long-run estimates obtained from DOLS and FMOLS techniques support the presence of the EKC (inverted U-shape) and the RCH.

Originality/value: To the best of the authors’ knowledge, the present work is the pioneer study for EKC and RCH investigation in the context of emerging economies. The policy implication is that these economies should look forward to drafting new policies to reduce environmental degradation and promote sustainable development.