Bounds testing approach to analysis of the environment Kuznets curve hypothesis

- We use the ARDL bounds test to cointegration to ensure long-run relationship.
- We employ the CUSUM and CUSUMSQ tests to ensure parameter stability.
- We found evidence of inverted U-shaped EKC in two of the eight countries.
- Economic growth and CO2 emissions follow an N-shaped trajectory in six of the eight countries.
- The results indicate that energy consumption Granger causes both CO2 emissions and economic growth in all countries.

This paper examines the long-run and the dynamic temporal relationships between economic growth, energy consumption, population density, trade openness, and carbon dioxide (CO2) emissions in Brazil, China, Egypt, Japan, Mexico, Nigeria, South Korea, and South Africa based on the environment Kuznets curve (EKC) hypothesis. We employ the ARDL Bounds test to cointegration and CUSUM and CUSUMSQ tests to ensure cointegration and parameter stability. The estimated results show that the inverted U-shaped EKC hypothesis holds in Japan and South Korea. In the other six countries, the long-run relationship between economic growth and CO2 emissions follows an N-shaped trajectory and the estimated turning points are much higher than the sample mean. In addition, the results indicate that energy consumption Granger-causes both CO2 emissions and economic growth in all the countries. Our results are consistent with previous studies that show that there is no unique relationship between energy consumption, population density, economic growth, trade openness, and the environment across countries.