Globalization, Institutional Quality, Economic Growth, and CO2 Emissions in OECD Countries using GMM and Quantile Regression

Abstract

The present study investigated the interplay between thirty-six (OCED) countries' carbon dioxide (CO2) emissions and the following variables: institutional quality (IQ), economic growth (EG), electricity consumption (EC), and renewable energy consumption (RE) from 1991 to 2018. The dynamic panel model and QR (Quantile Regression) were employed to accomplish this. In addition to other panel unit root tests used to assess the stationarity of the study variables, the Harris and Tzavalis (Journal of Econometrics, 1999, 91 (2), 201–226) and Levin et al. (Journal of Econometrics, 2002, 108 (1), 1–24) tests indicate that each of the variables is a combination of I (0) and I(I). Cointegration in the study variables was investigated using the cointegration tests devised by Westerlund, Kao, and Pedroni; the results indicate that cointegration exists in the research variables. The outcomes of the one-step difference GMM, one-step system GMM, and two-step system GMM indicate that RE use, GB, and IQ have an adverse effect on CO2 emissions in (selected OECD) countries that assist in reducing CO2 excretion. Conversely, the utilisation of EG and EC initiates detrimental effects on the environment and climate. Furthermore, to validate the robustness of the methods, simultaneous quantile regression (SQR) and panel quantile regression (PQR) were implemented in this study. The assessed QR (Quantile Regression) results of the study indicate that EG and EC consumption is responsible for the environmental and climate damage, whereas RE, GB, and IQ consumption reduces CO2 emissions. Following the analysis of the outcomes, additional recommendations are provided.

Keywords- Globalization, Institutional Quality, Economic Growth, CO2 Emission GMM, Quantile Regression