Abstract
The effect of quality institutions on growth-environmental nexus is a generally ignored topic, especially in South Asia economies affiliated with the belt and road initiatives (BRIs). To fill this gap, we have examined the effect of BRI policy, economic freedom (EF), and institutional quality (IQ) on growth-environmental nexus in the South Asian region from 1984 to 2019. We have used CO2 emission as a proxy for the environment in this study. To prevent variable bias, we also included energy consumption (EN) and trade openness (TO) as key factors in the model. To solve the problem of cross-sectional dependence, we have used the second-generational unit root test. The results of unit root tests indicate that the variable IQ is stationary at the level and other variables are stationary at the first difference. Furthermore, all of the variables are cointegrated, according to the panel cointegration test. Thus, we have used the panel autoregressive distributed lag (ARDL) method to estimate the long-run (LR) and short-run (SR) impact of response factors on economic growth. Furthermore, this research utilized the Granger causality test among the selected variables to inquire into the causalities. The basic findings are as follows: (i) A significantly positive interaction variable (CO2IQ) among CO2 and IQ suggests that effective and fair political institutions are critical for increasing economic development and decreasing CO2 emissions simultaneously. (ii) Economic growth is invigorated by energy consumption, trade, economic freedom, and institutional quality. (iii) Since 2013, more significant economic growth has been stimulated by BRI policy in BRI-associated countries; thus, both the SR and LR results are significantly positive. Hence, it is essential to improve the quality of institutions to reduce carbon emissions during economic growth.
Similar content being viewed by others
Data availability
Data are accessible from the corresponding author upon request.
References
Abid M (2017) Does economic, financial and institutional developments matter for environmental quality? A comparative analysis of EU and MEA countries. J Environ Manag 188. https://doi.org/10.1016/j.jenvman.2016.12.007
Acemoglu D, Robinson J (2010) The role of institutions in growth and development. Rev Econ Inst 1. https://doi.org/10.5202/rei.v1i2.14
Adebola Solarin S, Al-Mulali U, Ozturk I (2017) Validating the environmental Kuznets curve hypothesis in India and China: the role of hydroelectricity consumption. Renew Sust Energ Rev. https://doi.org/10.1016/j.rser.2017.07.028
Ahmad N, Du L, Lu J, Wang J, Li HZ, Hashmi MZ (2017) Modelling the CO2 emissions and economic growth in Croatia: is there any environmental Kuznets curve? Energy 123. https://doi.org/10.1016/j.energy.2016.12.106
Alshehry AS, Belloumi M (2017) Study of the environmental Kuznets curve for transport carbon dioxide emissions in Saudi Arabia. Renew Sust Energ Rev. https://doi.org/10.1016/j.rser.2016.11.122
Asoni A (2008) Protection of property rights and growth as political equilibria. J Econ Surv 22. https://doi.org/10.1111/j.1467-6419.2008.00554.x
Aziz OG (2020) FDI inflows and economic growth in Arab region: the institutional quality channel. Int J Financ Econ. https://doi.org/10.1002/ijfe.2197
Bakirtas T, Akpolat AG (2018) The relationship between energy consumption, urbanization, and economic growth in new emerging-market countries. Energy 147. https://doi.org/10.1016/j.energy.2018.01.011
Begum RA, Sohag K, Abdullah SMS, Jaafar M (2015) CO2 emissions, energy consumption, economic and population growth in Malaysia. Renew Sust Energ Rev. https://doi.org/10.1016/j.rser.2014.07.205
Bhattacharya M, Awaworyi Churchill S, Paramati SR (2017) The dynamic impact of renewable energy and institutions on economic output and CO2 emissions across regions. Renew Energy 111. https://doi.org/10.1016/j.renene.2017.03.102
Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47. https://doi.org/10.2307/2297111
Cheng LK (2016) Three questions on China’s “Belt and Road Initiative.” China Econ Rev 40. https://doi.org/10.1016/j.chieco.2016.07.008
Chiou-Wei SZ, Chen CF, Zhu Z (2008) Economic growth and energy consumption revisited - evidence from linear and nonlinear Granger causality. Energy Econ 30. https://doi.org/10.1016/j.eneco.2008.02.002
Dauda L, Long X, Mensah CN, Salman M (2019) The effects of economic growth and innovation on CO2 emissions in different regions. Environ Sci Pollut Res 26. https://doi.org/10.1007/s11356-019-04891-y
Duan F, Ji Q, Liu BY, Fan Y (2018) Energy investment risk assessment for nations along China’s Belt & Road Initiative. J Clean Prod 170. https://doi.org/10.1016/j.jclepro.2017.09.152
Gagliardi F (2008) Institutions and economic change: a critical survey of the new institutional approaches and empirical evidence. J Soc Econ 37. https://doi.org/10.1016/j.socec.2007.03.001
Grossman G, Krueger A (1991) Environmental Impacts of a North American Free Trade Agreement. National Bureau of Economic Research. https://doi.org/10.3386/w3914
Grossman GM, Krueger AB (1995) Economic growth and the environment. Q J Econ 110. https://doi.org/10.2307/2118443
Hafeez M, Chunhui Y, Strohmaier D, Ahmed M, Jie L (2018) Does finance affect environmental degradation: evidence from One Belt and One Road Initiative region? Environ Sci Pollut Res 25. https://doi.org/10.1007/s11356-018-1317-7
Hafeez M, Yuan C, Khelfaoui I, Musaad ASO, Akbar MW, Jie L (2019) Evaluating the energy consumption inequalities in the one belt and one road region: implications for the environment. Energies 12. https://doi.org/10.3390/en12071358
Haider S, Adil MH (2019) Does financial development and trade openness enhance industrial energy consumption? A sustainable developmental perspective. Manag Environ Qual 30. https://doi.org/10.1108/MEQ-03-2019-0060
Heckelman JC (2000) Economic freedom and economic growth: a short-run causal investigation. 7 3. https://doi.org/10.1080/15140326.2000.12040546
Hosseini HM, Kaneko S (2013) Can environmental quality spread through institutions? Energy Policy 56. https://doi.org/10.1016/j.enpol.2012.12.067
Huang Y (2016) Understanding China’s Belt & Road Initiative: motivation, framework and assessment. China Econ Rev 40. https://doi.org/10.1016/j.chieco.2016.07.007
Johansen S (1988) Statistical analysis of cointegration vectors. J Econ Dyn Control 12. https://doi.org/10.1016/0165-1889(88)90041-3
Kao C, Chiang MH (2000) On the estimation and inference of a cointegrated regression in panel data. Adv Econ:15. https://doi.org/10.1016/S0731-9053(00)15007-8
Kinderman D (2012) Free us up so we can be responsible!' the co-evolution of corporate social responsibility and neo-liberalism in the UK, 1977-2010. Soc Econ Rev 10. https://doi.org/10.1093/ser/mwr028
Lau LS, Choong CK, Eng YK (2014) Carbon dioxide emission, institutional quality, and economic growth: empirical evidence in Malaysia. Renew Energy 68. https://doi.org/10.1016/j.renene.2014.02.013
Lee CC, Chang CP (2005) Structural breaks, energy consumption, and economic growth revisited: Evidence from Taiwan. Energy Econ 27. https://doi.org/10.1016/j.eneco.2005.08.003
Liu HY, Tang YK, Chen XL, Poznanska J (2017) The determinants of Chinese outward FDI in countries along “One Belt One Road.” Emerg Mark Financ Trade 53. https://doi.org/10.1080/1540496X.2017.1295843
Mahmood T, Ahmad E (2018) The relationship of energy intensity with economic growth:evidence for European economies. Energy Strat Rev 20. https://doi.org/10.1016/j.esr.2018.02.002
Munir K, Riaz N (2020) Asymmetric impact of energy consumption on environmental degradation: evidence from Australia, China, and USA. Environ Sci Pollut Res 27. https://doi.org/10.1007/s11356-020-07777-6
North DC (1990) Institutions, institutional change and economic performance, institutions, institutional change and economic performance. https://doi.org/10.1017/cbo9780511808678
Olson M (1996) Distinguished lecture on economics in government: big bills left on the sidewalk: why some nations are rich, and others poor. J Econ Perspect 10. https://doi.org/10.1257/jep.10.2.3
Ozcan B (2013) The nexus between carbon emissions, energy consumption and economic growth in Middle East countries: a panel data analysis. Energy Policy 62. https://doi.org/10.1016/j.enpol.2013.07.016
Panayotou T (1997) Demystifying the environmental Kuznets curve: turning a black box into a policy tool. Environ Dev Econ 2. https://doi.org/10.1017/S1355770X97000259
Panayotou T (1994) Empirical tests and policy analysis of environmental degradation at different stages of economic development. Pac Asian J Energy 4
Pedroni P (2000) Fully modified ols for heterogeneous cointegrated panels. In Nonstationary Panels, Panels Cointegration, and Dynamic Panels. Nonstationary Panels, Panel Cointegration and Dynamic Panels, 15.
Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J Appl Econ:22. https://doi.org/10.1002/jae.951
Pesaran MH, Pesaran MH, Shin Y, Smith RP (1999) Pooled mean group estimation of dynamic heterogeneous panels. J Am Stat Assoc:94. https://doi.org/10.1080/01621459.1999.10474156
Pesaran MH, Smith R (1995) Estimating long-run relationships from dynamic heterogeneous panels. J Econ 68. https://doi.org/10.1016/0304-4076(94)01644-F
Phuc Canh N, Schinckus C, Thanh SD (2019) Do economic openness and institutional quality influence patents? Evidence from GMM systems estimates. Int Econ 157. https://doi.org/10.1016/j.inteco.2018.10.002
Pradhan RP, Arvin MB, Hall JH, Norman NR (2017) ASEAN economic growth, trade openness and banking-sector depth: the nexus. EconomiA 18. https://doi.org/10.1016/j.econ.2017.05.002
Rahman MM (2017) Do population density, economic growth, energy use and exports adversely affect environmental quality in Asian populous countries? Renew Sust Energ Rev. https://doi.org/10.1016/j.rser.2017.04.041
Rauf A, Liu X, Amin W, Rehman OU, Sarfraz M (2018) Nexus between industrial growth, energy consumption and environmental deterioration: OBOR Challenges and prospects to China, in: 5th International Conference on Industrial Economics System and Industrial Security Engineering, IEIS 2018 - Proceeding. https://doi.org/10.1109/IEIS.2018.8597991
Rolland N (2017) China’s “belt and road initiative”: underwhelming or game-changer? Wash Q 40. https://doi.org/10.1080/0163660X.2017.1302743
Russel DR, Berger BH (2020) Weaponizing the Belt and Road Initiative. Asia Policy Society Institute.
Saidi K, Rahman MM, Amamri M (2017) The causal nexus between economic growth and energy consumption: new evidence from global panel of 53 countries. Sustain Cities Soc 33. https://doi.org/10.1016/j.scs.2017.05.013
Salman M, Long X, Dauda L, Mensah CN (2019a) The impact of institutional quality on economic growth and carbon emissions: evidence from Indonesia, South Korea and Thailand. J Clean Prod 241. https://doi.org/10.1016/j.jclepro.2019.118331
Salman M, Long X, Dauda L, Mensah CN, Muhammad S (2019b) Different impacts of export and import on carbon emissions across 7 ASEAN countries: a panel quantile regression approach. Sci Total Environ 686. https://doi.org/10.1016/j.scitotenv.2019.06.019
Sarkodie SA, Adams S (2018) Renewable energy, nuclear energy, and environmental pollution: accounting for political institutional quality in South Africa. Sci Total Environ 643. https://doi.org/10.1016/j.scitotenv.2018.06.320
Sebri M, Ben-Salha O (2014) On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: fresh evidence from BRICS countries. Renew Sust Energ Rev. https://doi.org/10.1016/j.rser.2014.07.033
Shahbaz M, Nasreen S, Ahmed K, Hammoudeh S (2017) Trade openness–carbon emissions nexus: the importance of turning points of trade openness for country panels. Energy Econ 61. https://doi.org/10.1016/j.eneco.2016.11.008
Shahbaz M, Zakaria M, Shahzad SJH, Mahalik MK (2018) The energy consumption and economic growth nexus in top ten energy-consuming countries: fresh evidence from using the quantile-on-quantile approach. Energy Econ 71. https://doi.org/10.1016/j.eneco.2018.02.023
Sikder A, Inekwe J, Bhattacharya M (2019) Economic output in the era of changing energy-mix for G20 countries: new evidence with trade openness and research and development investment. Appl Energy 235. https://doi.org/10.1016/j.apenergy.2018.10.092
Sinha A, Shahbaz M (2018) Estimation of environmental Kuznets curve for CO2 emission: role of renewable energy generation in India. Renew Energy 119. https://doi.org/10.1016/j.renene.2017.12.058
Slesman L, Baharumshah AZ, Ra'ees W (2015) Institutional infrastructure and economic growth in member countries of the Organization of Islamic Cooperation (OIC). Econ Model 51. https://doi.org/10.1016/j.econmod.2015.08.008
Subramanian A (2007) The evolution of institutions in India and its relationship with economic growth. Oxf Rev Econ Policy 23. https://doi.org/10.1093/oxrep/grm014
Templet PH (1999) Energy, diversity and development in economic systems; an empirical analysis. Ecol Econ 30. https://doi.org/10.1016/S0921-8009(98)00085-8
Tiba S, Omri A (2017) Literature survey on the relationships between energy, environment and economic growth. Renew Sust Energ Rev. https://doi.org/10.1016/j.rser.2016.09.113
Trung NB (2019) The spillover effects of US economic policy uncertainty on the global economy: a global VAR approach. N Am J Econ Financ 48. https://doi.org/10.1016/j.najef.2019.01.017
Ulucak R, Bilgili F (2018) A reinvestigation of EKC model by ecological footprint measurement for high, middle and low income countries. J Clean Prod 188. https://doi.org/10.1016/j.jclepro.2018.03.191
Wang Q, Wang L (2020) Renewable energy consumption and economic growth in OECD countries: a nonlinear panel data analysis. Energy 207. https://doi.org/10.1016/j.energy.2020.118200
Wang Q, Zhang F (2021) The effects of trade openness on decoupling carbon emissions from economic growth – evidence from 182 countries. J Clean Prod 279. https://doi.org/10.1016/j.jclepro.2020.123838
Wang Q, Zhang F (2020) Does increasing investment in research and development promote economic growth decoupling from carbon emission growth? An empirical analysis of BRICS countries. J Clean Prod 252. https://doi.org/10.1016/j.jclepro.2019.119853
Welsch H (2004) Corruption, growth, and the environment: a cross-country analysis. Environ Dev Econ 9. https://doi.org/10.1017/S1355770X04001500
Westerlund J (2007) Testing for error correction in panel data. Oxf Bull Econ Stat 69. https://doi.org/10.1111/j.1468-0084.2007.00477.x
Williamson OE, Tadelis S (1989) Handbook of Industrial Organization, Transaction cost economics. J Law Econ 10
World Bank (2020) World development indicators | data. World Development Indicators.
Xu Z (1996) On the causality between export growth and GDP growth: an empirical reinvestigation. Rev Int Econ 4. https://doi.org/10.1111/j.1467-9396.1996.tb00094.x
Yao X, Yasmeen R, Li Y, Hafeez M, Padda IUH (2019) Free trade agreements and environment for sustainable development: a gravity model analysis. Sustainability (Switzerland) 11. https://doi.org/10.3390/su11030597
Young, S.L., Makhija, M.V (2014) Firms' corporate social responsibility behavior: an integration of institutional and profit maximization approaches. Journal of International Business Studies 45. https://doi.org/10.1057/jibs.2014.29
Zafar MW, Shahbaz M, Hou F, Sinha A (2019) From nonrenewable to renewable energy and its impact on economic growth: the role of research & development expenditures in Asia-Pacific Economic Cooperation countries. J Clean Prod 212. https://doi.org/10.1016/j.jclepro.2018.12.081
Zahonogo P (2017) Trade and economic growth in developing countries: evidence from sub-Saharan Africa. J African Trade 3. https://doi.org/10.1016/j.joat.2017.02.001
Zhu H, Duan L, Guo Y, Yu K (2016) The effects of FDI, economic growth and energy consumption on carbon emissions in ASEAN-5: evidence from panel quantile regression. Econ Model 58. https://doi.org/10.1016/j.econmod.2016.05.003
Author information
Authors and Affiliations
Contributions
Conceptualization: Junaid Ashraf, Liangqing Luo; introduction and review of empirical literature: Junaid Ashraf, Liangqing Luo, Muhammad Khalid Anser; methodology, formal analysis: Junaid Ashraf; writing—original draft preparation: Junaid Ashraf; formatting, writing—review, and editing: all authors.
Corresponding author
Ethics declarations
Ethical approval
Not applicable.
Consent to participate
All of the authors consented to participate in drafting this manuscript.
Consent for publication
All of the authors consent to publish this manuscript.
Competing interests
The authors declare no competing interests.
Additional information
Responsible Editor: Ilhan Ozturk
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendix
Appendix
Rights and permissions
About this article
Cite this article
Ashraf, ., Luo, L. & Anser, M.K. Do BRI policy and institutional quality influence economic growth and environmental quality? An empirical analysis from South Asian countries affiliated with the Belt and Road Initiative. Environ Sci Pollut Res 29, 8438–8451 (2022). https://doi.org/10.1007/s11356-021-16330-y
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-021-16330-y