Is the long-run relationship between economic growth, electricity consumption, carbon dioxide emissions and financial development in Gulf Cooperation Council Countries robust?
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Abstract The relationship between carbon dioxide emissions, economic growth, electricity consumption and financial development in the Gulf Cooperation Council (GCC) countries is investigated in this study using panel data for the period of 1980-2012. A number of econometric techniques: dynamic ordinary least squares (DOLS), fully modified ordinary least squares (FMOLS) and the dynamic fixed effect model (DFE) are applied in order to estimate the long-run relationship between the variables. The long-run relationship is found to be robust across these different econometric specifications. No significant short-run significant relationship was observed. Electricity consumption and economic growth have a positive long run relationship with carbon dioxide (CO<inf>2</inf>) emissions whilst a negative and significant relationship was found between CO<inf>2</inf> emissions and financial development. The findings imply that electricity consumption and economic growth stimulate CO<inf>2</inf> emissions in GCC countries while financial development reduces it. Granger causality results reveal that there is a bidirectional causal link between economic growth and CO<inf>2</inf> emissions and a unidirectional causal link running from electricity consumption to CO<inf>2</inf> emissions. However, there is no causal link between financial development and CO<inf>2</inf> emissions. Also, impulse response and variance decomposition analysis outline forecasted impacts of economic growth and electricity consumption on future CO<inf>2</inf> emissions. © 2015 Elsevier Ltd.