Trade Openness, Political Stability and Environmental Performance: What Kind of Long-Run Relationship?
Jing Niu
Xi’an University of Finance and Economics, Xi’an, Shaanxi (China)
Jun Wen
School of Economics and Finance, Xi’an Jiaotong University, Shaanxi (China)
Xiu-Yun Yang
School of Economics and Finance, Xi’an Jiaotong University, Shaanxi (China)
Chun-Ping Chang
cpchangxj@163.comXi’an University of Finance and Economics, Xi’an, Shaanxi (China)
Abstract
This paper investigates the long-run relationships among environmental performance, political stability, and trade openness for 126 countries as well as the sub-samples of OECD and non-OECD countries, using the panel cointegration and panel-based error correction models for the period 2002-2014. For the full sample and the non-OECD countries, our results corroborate that there exists a long-term equilibrium cointegrated relationship among the variables. Moreover, the panel fully modified ordinary least square (FMOLS) estimations present that political stability and trade openness have a negative effect on environmental performance in full samples case as well as the non-OECD countries, whereas trade openness exhibits a positive influence on environmental performance in OECD countries. The vector error correction model (VECM) shows a diversified negative causalities running from trade openness and political stability to environmental performance in the long run for both full samples and the sub-samples countries. The policy implication is that pollution haven hypothesis (PHH) is supported and trade regulations can help promote environmental performance; meanwhile, political stability accelerates macroeconomic performance and attracts more foreign investment. Overall, the government can carry on a policy to lower pollution levels, thus further advancing environmental performance.
Keywords:
political stability, trade openness, Environmental Performance Index, Panel Cointegration, causalityReferences
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Authors
Jing NiuXi’an University of Finance and Economics, Xi’an, Shaanxi China
Authors
Jun WenSchool of Economics and Finance, Xi’an Jiaotong University, Shaanxi China
Authors
Xiu-Yun YangSchool of Economics and Finance, Xi’an Jiaotong University, Shaanxi China
Authors
Chun-Ping Changcpchangxj@163.com
Xi’an University of Finance and Economics, Xi’an, Shaanxi China
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