Trade and Environment Nexus in Saudi Arabia: An Environmental Kuznets Curve Hypothesis
This research explores the effects of trade and income level on the Carbon Dioxide Emissions (CDE) in Saudi Arabia by using a period 1970-2016. Unit root and cointegration tests have been utilized for data analysis. Unit root test confirms the level of integration as one and cointegration has been found in our estimated model through bound testing procedure. In the long run, income is found responsible for increasing CDE but its square term is showing a negative impact on CDE. Therefore, this study has inveterate the presence of Environmental Kuznets Curve (EKC) hypothesis. Further, trade has negative impact on CDE. Therefore, trade has been remained helpful in reducing pollution levels in Saudi Arabia. The income, its square and trade have same directions of relationships in short run as in long run. Based on findings, this study recommends the Saudi government to liberalize trade policy to protect environment.
Keywords: Carbon Dioxide Emissions, Trade, Environmental Kuznets Curve
JEL Classifications: Q53, O49, Q56