Technological Innovation, Trade Openness, CO2 Emission and Economic Growth: Comparative Analysis between China and India

Hongzhong Fan, Md Ismail Hossain

Abstract


China and India are the two biggest transitional and developing economies of Asia but remains in the two distinct separate stages of structural change, technological innovation, trade, energy use, economic growth as well as differences in culture and religious beliefs. The aim of this study is to examine and compare the long and short-run relationships between Technological innovation, Trade openness, CO2 emission and Economic growth of China and India over the period of 1974–2016. We have utilized the ARDL Bounds Test methodology and Toda- Yamamoto Granger Causality test. The obtained results revealed that Technological innovation, Trade openness and CO2 emission have a significant positive impact on Economic growth in the long-run but mixed effect in the short-run in China. For India, On the other hand, Trade openness and CO2 emission have a significant positive impact in the long-run but CO2 emission has a negative impact in the short-run on Economic growth. Technological innovation is not significant in the long-run and both Technological innovation and Trade openness are not significant on Economic growth for India in the short-run. The Toda-Yamamoto Granger causality test reveals that bi-directional causality is running between Economic growth and Trade openness, between Technological innovation and CO2 emissions as well as a unidirectional causality is running from Technological innovation and CO2 emissions to Trade openness for China. On the other hand, our obtained results express that there is a unidirectional causality running from Economic growth, Technological innovation and Trade openness to CO2 emissions as well as from Technological innovation to Trade openness for India. The results obtained from this empirical analysis have an important policy implication for China and India.

Keywords: Technological innovation, Trade openness, CO2 emission, Economic growth, ARDL, Toda- Yamamoto Granger Causality, China and India

JEL Classifications: F43, O11, O33, O57, Q43

DOI: https://doi.org/10.32479/ijeep.7171


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