A Cointegration Analysis of Economic Growth and CO_2 Emissions: A Case Study of Malaysia

Abstract

The paper aims to establish a long-run and the Granger causal relationship between economic growth,  emissions, international trade, energy consumption, and population density in Malaysia. The study will use annual data from 1970 to 2014. A unique cointegrating relationship between our variables  was identified. The study employed the Auto-Regressive Distributed Lag  model to examine the Environmental Kuznets Curve . Our empirical results analysis showed a long-run relationship between per capita  emissions  and our explanatory variables . To investigate the Granger causal relationship between , the Vector Error Correction Model  was employed and our results, associated the absence of Granger causality between  emissions and economic growth  in the short-run while revealing a uni-directional Granger causality movement  from economic growth to  emissions in the long-run. Hence, an increase in  will lead to a rise in  emissions in Malaysia.