Economic Growth, CO2 Emissions, and Financial Development in Jordan: Equilibrium and Dynamic Causality Analysis

Abstract

This article contributes to the existing literature by investigating equilibrium and dynamic causality relationships among economic development, CO 2 emissions, energy consumption, financial development, foreign direct investments inflows, and gross fixed capital formation in the case of kingdom of Jordan over the 1976-2010 period. The ARDL approach has been employed to detect co-integration between the series. The VECM Granger causality is also applied to evaluate causal relationships among the variables. The findings suggest the existence of co-integration between economic growth and its determinants. In addition, CO 2 emissions, foreign direct investments inflows, and gross fixed capital formation have positive and significant impact on economic growth in long-run. Interestingly, the results of this paper indicate that environmental Kuznets curve hypothesis does exist between economic development and CO 2 emission in long-run and short-run.