Dynamic Effect of CO2 Emissions, Energy Consumption, and Trade Openness, on Economic Growth: Evidence from Emerging Countries Using Panel Data Analysis

Abstract

The aim of this research is to determine the effect of CO2 emissions, renewable energy consumption, population growth rate, exports, trade openness, labor force position and gross domestic savings on the economic growth in the chosen countries between 2013 to 2024. In order to study both, short run and long run dynamics among these variables, the study utilizes a variety of econometric estimation methods, such as panel ARDL, especially with a pooled mean group (PMG) and mean group (MG) estimator and, FMOLS, DOLS, and the Dumitrescu Hurlin panel causality test. Using the long-run results of the PMG model, it can be seen that the effectiveness of CO2 emissions, the consumption of renewable energy, population, exports, employment in the labor force, openness to trade, and savings are all positively influential in the economic growth. The validity of these outcomes is confirmed by the propensity checks based on FMOLS and DOLS estimations. Conversely, few variables are statistically significant and have a statistically significant short-run effect and error correction term is indicative of short towards long run equilibrium. A Dumitrescu Hurlin causality analysis finds two-way causation between CO2 emissions and economic growth and between renewable energy consumption and savings and economic growth. In addition, exports, population, and labor force also causally affect the GDP per capita in one direction. On balance, the findings of both environmental and macro-economic drivers in the continuous economic growth suggest that the policy necessary to promote sustainable development should be the increasing of renewable energy use, stimulation of exports, mobilization of local savings and increase in the number of working places.