Quality of the environment and economic growth in Malaysia: the case of CO². An empirical analysis of EKC / Marianno Sikodol

The relationship between CO2 and GDP has been empirically tested by many researchers in quest to find the existence of Environmental Kuznets Curve popularized by Simon Kuznets from the hypothesized of an inverted UU" shape relationship with income and inequality, Kuznets (1955). In this study, Malaysia as one of the developing nations will be tested to find the inverted "U" shape existence and from the extensive analysis found that no shaped of inverted "IT but instead an "N" shaped normal was found in the form of cubic as our reduced-form implied. Longrun relationship among variables tends to exist where one cointegrated relationship was found by testing the variables in Johansen Cointegration test. Granger causality test was performed to indentify the causality and it was found that there was an unidirectional causality between GDP and CO2 where GDP does granger cause to the changes in CO2 but CO2 does not granger cause GDP. Thus, we can say that GDP lead to an increase in CO2 emission. These findings hopefully might tackle the policy makers to readjust the existed policy in order to achieve sustainable development in the long-run. Investment on the green technology and other abatement expenses might not give big effect to the GDP and hurting the economic growth of Malaysia.