Dynamic relationship between Air pollution and Economic growth in Jordan: An Empirical Analysis

Abstract

Apparently, throughout human history, pollution and the economy appear to have been inextricably linked. However, the relationship between environmental harm and economic development is complex, and disciplinary biases have splintered our understanding of it. This study applies Johansen cointegration which indicate that there exists a long-term relationship between air pollutants and economic growth. Multiple regression model indicates that there is a significant relationship between air pollution variables and the economic growth. The vector autoregressive model (Var) indicates a short run relationship between the variables. Then, Vector error correction model was fitted and the Environmental Kuznets Curve (EKC) is supported. More so, the EKC shows that economic growth has both positive and negative significant impact on air pollution. Meanwhile, Granger causality test shows that economic growth has causal effect on air pollution. This indicates that Jordan has reduced CO2 emissions along with other pollutants and thereby contributed to environmental improvement in the country.