Environmental Science and Pollution Research

, Volume 25, Issue 24, pp 24013–24040 | Cite as

The dependency analysis between energy consumption, sanitation, forest area, financial development, and greenhouse gas: a continent-wise comparison of lower middle-income countries

  • Muhammad Tariq Iqbal Khan
  • Muhammad Rizwan YaseenEmail author
  • Qamar Ali
Research Article


This study explored the long-run association among greenhouse gases (GHGs), financial development, forest area, improved sanitation, renewable energy, urbanization, and trade in 24 lower middle-income countries from Asia, Europe, Africa, and America (South and North) by using panel data from 1990 to 2015. Granger causality was tested by Toda and Yamamoto approach. The bi-directional causality was established among urbanization and GHGs (Asia), financial development and forest (Asia), energy use and renewable energy (Asia), renewable energy and forest (Asia), improved sanitation and forest (Asia, Africa, America), urbanization and forest (Asia), and improved sanitation and financial development (Europe). The GHG emission also shows one-way causality is running from financial development to GHG (America), energy to GHG (Asia), renewable energy to GHG (America), forest area to GHG (America), trade openness to GHG (Africa), urbanization to GHG (Europe), GHG to financial development (Europe), GHG to energy use (Europe, Africa, and America), and GHG to trade openness (Asia). On the basis of fully modified ordinary least square and generalized method of moment, the reciprocal relationship of GHGs was observed due to financial development in Asia and Africa; renewable energy in all panels; forest area in Asia, Europe, and America; improved sanitation in Asia, Africa, and America; trade openness in Africa; and urbanization in Europe and America. Policymakers should concentrate on these variables for the reduction in GHGs. The annual convergence towards long-run equilibrium was 50.5, 31.9, and 20.9% for America, Asia, and Africa, respectively.


Environment Financial development index GMM Granger causality Toda and Yamamoto 




Asia Cooperation Dialogue


Akaike information criterion


Auto-regressive distributed lag


Canonical cointegrating regression


Carbon dioxide


Dynamic ordinary least square


Error correction model


Fully modified ordinary least square


Gulf Cooperation Council


Gross domestic product


Greenhouse gas emission


Generalized linear model


Generalized method of moments


High-income countries


International Centre for Trade and Sustainable Development


Im, Pesaran, and Shin


International Trade Centre


Low-income countries


Levin, Lin, and Chu


Lower middle-income countries


The Middle East and North Africa


Maddala and Wu


Principal component analysis


Sustainable Development Goals


Upper middle-income countries


United Nations


Vector auto-regressive


Vector error correction model


World development indicators


World Economic Forum


World Trade Organization


Representation of the first difference


Representation of the ith country


Representation of the time period


GHG elasticity

\( {{\widehat{\upbeta}}^{\ast}}_{\mathrm{GFM}} \)

Estimator of FMOLS

\( {\mathrm{t}}_{{\widehat{\upbeta}}_{\mathrm{GFM}}^{\ast }} \)

T-statistics of FMOLS


Estimated parameters of VECM


The weight of the first component of PCA


The weight of the second component of PCA


The weight of the third component of PCA


Broad money


Domestic credit provided by the financial sector


Domestic credit to the private sector


Economy, environment, and energy


Economic growth


Energy consumption


Financial development


Financial development index


Forest area


Trade openness


Renewable energy consumption


Improved sanitation




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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  • Muhammad Tariq Iqbal Khan
    • 1
  • Muhammad Rizwan Yaseen
    • 2
    Email author
  • Qamar Ali
    • 3
  1. 1.Department of EconomicsGovernment Postgraduate CollegeJaranwalaPakistan
  2. 2.Department of EconomicsGovernment College UniversityFaisalabadPakistan
  3. 3.Department of EconomicsVirtual University of PakistanFaisalabadPakistan

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