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Modeling CO2 emissions in Malaysia: an application of Maki cointegration and wavelet coherence tests

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Abstract

One of humanity’s most significant problems in the twenty-first century revolves around how to balance the mitigation of environmental pollution while achieving sustainable economic development. Despite increased awareness and dedication to climate change, the planet is still seeing a drastic decrease in the volume of pollutant emissions. This study explores the long-run and causal impact of economic growth, financial development, urbanization, and gross capital formation on Malaysia’s CO2 emissions based on the STIRPAT framework. The current paper employs recently developed econometric techniques such as Maki co-integration, auto-regressive distribution lag (ARDL), fully modified OLS (FMOLS), dynamic ordinary least square (DOLS), and wavelet coherence and gradual shift causality tests to investigate these interconnections. The advantage of the gradual shift causality test is that it can capture the causality in the presence of a structural break(s). The findings from the Maki co-integration and ARDL bounds tests reveal evidence of cointegration among the variables. The ARDL test reveals that economic growth, gross capital formation, and urbanization exert a positive impact on CO2 emissions. Furthermore, the wavelet coherence test reveals that there is a significant dependency between CO2 emissions and economic growth, gross capital formation, and urbanization. The Toda Yamamoto and Gradual shift causality tests reveal that there is a (a) unidirectional causality from urbanization to CO2 emissions, (b) unidirectional causality from economic growth to CO2 emissions, and (c) unidirectional causality from gross capital formation to CO2 emissions.

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Data availability

The data that support the findings of this study are available from the World Bank.

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Authors and Affiliations

  1. Department of Marketing, School of Business, Wuchang University of Technology, Wuhan, China

    Lingyun Zhang

  2. Faculty of Science, The University of Sydney, Sydney, Australia

    Zecheng Li

  3. Faculty of Economics and Administrative Sciences, European University of Lefke, Lefke, Northern Cyprus, 10, Mersin, Turkey

    Dervis Kirikkaleli

  4. Faculty of Economics and Administrative Sciences, Department of Business Administration, Cyprus International University, North Cyprus, 10, Mersin, Turkey

    Tomiwa Sunday Adebayo

  5. Department of Information Technology, School of Computing and Technology, Eastern Mediterranean University, North Cyprus, 10, Mersin, Turkey

    Ibrahim Adeshola

  6. Department of Business Management, Faculty of Economics and Administrative Sciences, Girne American University, North Cyprus, 10, Mersin, Turkey

    Gbenga Daniel Akinsola

Authors
  1. Lingyun Zhang
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  2. Zecheng Li
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  3. Dervis Kirikkaleli
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  4. Tomiwa Sunday Adebayo
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  6. Gbenga Daniel Akinsola
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Contributions

Dervis Kirikkaleli and Lingyun Zhang designed the experiment and collected the dataset. The introduction and literature review sections are written by Tomiwa Sunday Adebayo and Ibrahim Adeshola. Dervis Kirikkaleli and Gbenga Daniel Akinsola constructed the methodology section and empirical outcomes in the study. Tomiwa Sunday Adebayo and Zecheng Li contributed to the interpretation of the outcomes. All the authors read and approved the final manuscript.

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Correspondence to Dervis Kirikkaleli.

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Zhang, L., Li, Z., Kirikkaleli, D. et al. Modeling CO2 emissions in Malaysia: an application of Maki cointegration and wavelet coherence tests. Environ Sci Pollut Res 28, 26030–26044 (2021). https://doi.org/10.1007/s11356-021-12430-x

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