Estimating Environmental Kuznets Curve Using Fractional Co-integration Method

• Published in: Pizhūhishnāmah-i Iqtiṣād-i Inirzhī-i Īrān Vol. 2; no. 5; pp. 129 - 152
• Main Authors: saeed samadi, naser yarmohammadian
• Format: Journal Article
• Language: Persian
• Published: Allameh Tabataba'i University Press 01.01.2013
• Subjects: Environmental Kuznets Curve; Co-integration Test; Fractional Co-Integration Test; Low Middle Income Countries
• ISSN: 2423-5954

Since the first inception in 1992 that the debate was started on the relationship between environment and growth, the Environmental Kuznets Curve hypothesis has been subject of intense scrutiny. The most recent line of investigation criticizes the EKC hypothesis for the lack of sufficient statistical testing of existence. Specially by introducing co-integration concept in time series data it is asked whether econometric estimations can show long-run inverted U shaped relationship between income and environmental pollution. On the basis of panel integration and co-integration tests, Stern (2004) and Perman and Stern (1999, 2003) have presented evidence and forcefully stated that the EKC hypothesis does not exist. In this paper by using fractional co-integration test, EKC is evaluated for 27 low middle income countries. The conclusions show according to classical co-integration test there is no co-integrated EKC based on HADRI statistics. Using fractional co-integration, evidences support a common EKC for countries: El Salvador, Nicaragua, Iran, Pakistan, Paraguay, Tunisia but our data does not give useful information about EKC existence. fareast-font-family:Calibri; mso-bidi-font-family:"Times New Roman";color:#333333;mso-no-proof:no'>FARIMA) were applied using the daily oil price in order to forecast oil prices. To compare the forecast accuracy of the model, the prediction error criteria was used. The results showed that the performance of FARIMA is much better than the other two models.