Investigating the existence of asymmetric Environment Kuznets Curve and Pollution-Haven Hypothesis in China: Fresh evidence from QARDL and Quantile Granger Causality

Abstract

Abstract This study aims to analyze the asymmetric long-run relationship between economic growth (EG), Foreign Direct Investment (FDI) and carbon emissions (CO2) within the context of the Environment Kuznets curve (EKC) and the pollution haven hypothesis (PHH) in China. Employing the quarterly data from 1982Q1 to 2018Q4, we have used novel techniques to meet the stated objectives of our study, named Quantile ARDL and quantile Granger causality. The significant implication of this method is that it provides locational asymmetry. We find strong evidence of the EKC and PHH for China based on the empirical results of linear and nonlinear ARDL models. Similarly, findings of quantile Granger causality validate the bidirectional relationship among all variables in upper and lower quantiles. Moreover, the results of the Wald test confirm the asymmetric long-run relationship between FDI and carbon emissions (CO2). This study will be conducive for the policymakers to combat environmental contamination concerning economic growth and FDI inflow in China.