The Influences of Economic Indicators on Environmental Pollution in Malaysia

Foo Shi He, Gerald Goh Guan Gan, Usama Al-mulali, Sakiru Adebola Solarin

Abstract


This study aims to investigate the relationship between environmental degradation (ecological footprint) and economic indicators such as gross domestic product (GDP), financial liberalisation, energy consumption, urbanisation, and trade openness in Malaysia. The use of financial liberalisation is driven by the factor that majority of the previous studies focused on financial development that has a narrow definition. Autoregressive Distributed Lag model (ARDL) and Granger causality test has been used to identify the relationship between the variables from 1978 to 2013. The result shows that EKC (Environmental Kuznets curve) model does not apply in Malaysia due to the U-shape relationship between financial liberalisation and ecological footprint. Positive relationships are identified between GDP, trade openness, energy consumption and ecological footprint. The results of the study suggest that Malaysia should improve its energy efficiency and focus more on its environmental well-being while increasing its GDP.

Keywords: Financial liberalisation, Ecological Footprint, Malaysia

JEL Classifications: Q5, P28, O16, G18, P34, P43

DOI: https://doi.org/10.32479/ijeep.7489


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