Asymmetric Impact of Institutional Quality on Environmental Degradation: Evidence of the Environmental Kuznets Curve

Abstract

This paper aims to discover the asymmetry impacts and co-integration between gross domestic product, financial development, energy use and environmental degradation by featuring institutional quality covering the Malaysia economy during the period from 1984 until 2017 using a nonlinear auto-regressive distributed lag model. The results confirm the existence of the Environmental Kuznets Curve hypothesis for both linear and nonlinear analyses, thus verifying the relevance of symmetric and asymmetric EKC hypotheses for Malaysia. Further, this study verifies the attributes of financial development and institutional quality that mitigates the concern on CO2 emissions, but contradicting results were produced on energy use. The implication of this finding provides new guidelines for Malaysia authorities to consider the asymmetries in formulating environment-related policies to maintain environmental quality and achieve their sustainable development goals.