GHG Emissions and Economic Growth in the European Union, Norway, and Iceland: A Validated Time-Series Approach Based on a Small Number of Observations

Abstract

This research aims to ensure methodological conformance and to test the validity of its empirical application. To do so, the study analysed differentiation of the development patterns of four time-series variables. The relationships between greenhouse gas (GHG) emissions, employment, inflation, and gross domestic product (GDP) at constant prices were analysed, comparing the European Union (EU-27) and two European Free Trade Association countries. The study period covers twelve years of monthly and quarterly data from the beginning of 2010 to mid-2021, where the highest frequency of data was 138 observations. The methodology used included unit root testing and the vector autoregressive model (VAR). The study’s main results show that GDP at constant prices significantly affected GHG emissions in the EU-27 countries. Meanwhile, the lag between inflation and employment did not have a considerable impact. This finding shows that inflation was not a stable variable and had a strong autocorrelation. Variable employment did not follow a normal distribution. It was necessary for this research to adopt a suitable model for the technical procedure.