Asymmetric Dynamics of Oil Price and Environmental Degradation: Evidence from Pakistan

Abstract

The main objective of the study is to explore asymmetric impact of oil price on environmental degradation in Pakistan over the period 1975-2018. The study employs the nonlinear autoregressive distributive lag (NARDL) method to check the asymmetric connection of oil price with carbon dioxide (CO2) emissions which represents environmental degradation along with gross capital formation, energy consumption, foreign direct investment and population. The NARDL result expresses that there is different effect of oil price as we break it into positive and negative changes, and decrease in oil price has a greater effect on environmental degradation in Pakistan. The other variables, FDI and energy consumption and population, have a positive and significant effect on CO2 emission. The study provides the policies for policymakers and government officials after uncovering the asymmetric relationship between oil and other variables with an environment that would be helpful in policymaking for Pakistan.