Effects of energy production and CO2 emissions on economic growth in Iran: ARDL approach

This paper investigates the relation among energy production, CO2 emissions and economic growth of Iran with additional variables such as domestic and foreign investment, inflation, population density and agricultural land. Annual time series data is used for the period of 1971-2011 according to data availability. Our main results are as: (1) there is long run relationship among the variables. (2) CO2 emissions has positive relation with economic growth. (3) energy production has positive effect on the economic growth of Iran. (4) Domestic investment has more contribution than the foreign investment in the explanation of economic growth. (5) Speed of adjustment shows that system will move to equilibrium path quickly. Diagnostic tests confirm the perfectness of the model. DOLS and FMOLS shows the similar results. Further, variance decomposition and cholseky impulse response function also show similar findings.