Does inflation instability affect environmental pollution? Fresh evidence from Asian economies

Author:

Ahmad Waheed1,Ullah Sana1,Ozturk Ilhan23ORCID,Majeed Muhammad Tariq1

Affiliation:

1. School of Economics, Quaid-i-Azam University, Islamabad, Pakistan

2. Faculty of Economics and Administrative Sciences, Cag University, Mersin, Turkey

3. Department of Medical Research, China Medical University Hospital, China Medical University, Taichung, Taiwan

Abstract

The present study examines the linkage between inflation instability and pollution emissions for the 40 Asian economies over the period of 1990–2018. However, a limited number of researches investigate the linkage between inflation instability and the environment. For empirical analysis, econometric methods namely cross-sectional test statistics for examining the dependency, cross-sectionally augmented Dickey-Fuller (CADF) and cross-sectional Im, Pesaran, and Shin (CIPS) for the panel unit root, Westerlund technique for the long-run relationship, and Fully Modified Ordinary Least Square (FMOLS) to estimate the long-run coefficients have adopted. Additionally, the Dumitrescu and Hurlin panel causality test is applied to investigate the causal nexus among the panel data series. The empirical finding depicts that inflation instability improves environmental performance implying that higher price volatility creates uncertainty that discourages investment projects and consumption, hence improves environmental quality. However, the results indicate that financial development stimulates pollution emissions and degrades environmental condition. Based on these findings, the study opens up innovative intuitions for policymakers to support a robust role of economic stability in attaining targets relevant to pollution reduction.

Publisher

SAGE Publications

Subject

Energy (miscellaneous),Energy Engineering and Power Technology,Renewable Energy, Sustainability and the Environment,Environmental Engineering

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