Asymmetric Effect of Shadow Economy on Environmental Pollution in Egypt: Evidence from Bootstrap NARDL Technique


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Authors

  • Awadh Ahmed Mohammed Gamal Department of Economics, Faculty of Management and Economics, Sultan Idris Education University (UPSI), 35900 Tanjong Malim, Perak Darul Ridzuan, Malaysia
  • Joseph David Department of Economics, Faculty of Management and Economics, Sultan Idris Education University (UPSI), 35900 Tanjong Malim, Perak Darul Ridzuan, Malaysia; & Centre for Economic Policy and Development Research (CEPDeR), Covenant University, Nigeria
  • Mohd Asri Mohd Noor Department of Economics, Faculty of Management and Economics, Sultan Idris Education University (UPSI), 35900 Tanjong Malim, Perak Darul Ridzuan, Malaysia
  • Mohd Yahya Mohd Hussin Department of Economics, Faculty of Management and Economics, Sultan Idris Education University (UPSI), 35900 Tanjong Malim, Perak Darul Ridzuan, Malaysia
  • K. Kuperan Viswanathan Haas School of Business, University of California Berkeley, CA 94720, USA.

DOI:

https://doi.org/10.32479/ijeep.15605

Keywords:

Shadow Economy, Environmental Pollution, Globalisation, Egypt, Bootstrap NARDL and Dynamic NARDL Simulations

Abstract

This study examines the asymmetric effect of shadow economy on environmental pollution in Egypt during the 1970 and 2022 period. Using the bootstrap nonlinear autoregressive distributed lag (NARDL) bounds-testing approach, the study presents evidence of nonlinear cointegrating relationship between environmental degradation (carbon emission) and shadow economic activities (alongside globalisation, urbanisation, GDP per capita, and industrial growth). In addition, the results demonstrate that the impact of shadow economy (SE) on environmental pollution (ENV) is nonlinear, with the positive shock in shadow economy promoting environmental degradation and negative shocks promoting environmental quality, both in the short- and long-run. However, the study discovered that the magnitude of the impact of the SE on ENV is larger in the short-run. This is further validated by the dynamic ARDL simulation technique which demonstrates that the immediate effect of the SE on ENV is large. Additionally, the results suggest that income growth, urbanisation, and industrial growth are important drivers of environmental pollution. Therefore, the study recommends the adoption, and most importantly, implementation, of policies and strategies geared towards reducing the shadow economy, and consequently environmental pollution.

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Published

2024-05-08

How to Cite

Gamal, A. A. M., David, J., Noor, M. A. M., Hussin, M. Y. M., & Viswanathan, K. K. (2024). Asymmetric Effect of Shadow Economy on Environmental Pollution in Egypt: Evidence from Bootstrap NARDL Technique. International Journal of Energy Economics and Policy, 14(3), 206–215. https://doi.org/10.32479/ijeep.15605

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