Open AccessImpact of Private Investment, Economic Growth and Financial Development on Environmental Degradation: Evidence from Pakistan
Author(s) -
Shabana Parveen,
Bibi Aisha Sadiqa,
Sher Ali,
Farrah Yasmin
Publication year - 2021
Publication title -
review of economics and development studies
Language(s) - English
Resource type - Journals
eISSN - 2519-9706
pISSN - 2519-9692
DOI - 10.47067/reads.v7i1.313
Subject(s) - akaike information criterion , investment (military) , cointegration , economics , unit root test , unit root , econometrics , environmental degradation , consumption (sociology) , distributed lag , regression analysis , return on investment , macroeconomics , production (economics) , mathematics , statistics , ecology , social science , sociology , politics , political science , law , biology
Private investment plays an important role in the process of economic growth and also impact natural environment of a country. The main purpose of the present study is to empirically analyze the impact of private investment and other macro economic variables on environmental degradation of Pakistan. For the purpose, time series data is collected for the years 1975 to 2017. The study used Linear regression model for analyzing the impact of private investment, energy consumption, financial development and economic growth on environmental degradation. Augmented Dickey Fuller (ADF) test and Phillips Perron (PP) test is used for identifying the unit root of the variables; first with an intercept then, with an intercept and a linear deterministic trend. Akaike Information Criterion (AIC) is used for selection of optimum lag whereas Johansen cointegration test is adopted for analyzing long run association in the variables. The results of linear regression model show that energy consumption and economic growth have a positive and statistically significant impact on CO2 emissions whereas the impact of private investment on CO2 emissions is negative. It means that in Pakistan, private investment is environment friendly. Based on study results, it is recommended that when formulating policies for economic growth and development, motivation should be given to private inverters in order to increase private investment.