Economic Globalisation, Growth and the Environment: Testing of Environment Kuznet Curve Hypothesis for MalaysiaRam N. Agarwal*
OYA Graduate School of Business, University Uttara Malaysia, Malaysia
- *Corresponding Author:
- Ram N. Agarwal
Visiting Professor of Economics and Finance
OYA- Graduate School of Business
University Uttara Malaysia, Malasiya
E-mail: [email protected]
Received May 25, 2012; Accepted June 17, 2012; PublishedJune 21, 2012
Citation: Agarwal RN (2012) Economic Globalisation, Growth and the Environment: Testing of Environment Kuznet Curve Hypothesis for Malaysia. J Bus Fin Aff 1:104. doi:10.4172/2167-0234.1000104
Copyright: © 2012 Agarwal RN. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Economic liberalization-growth-Environment nexus is well known but debatable and an open question in the economic literature. Results regarding this nexus are not straight forward but they are sometimes confusing and contradicting. Some studies have found that the two key elements of globalization viz. trade liberalization and inflow of Foreign Direct Investment (FDI) have a positive impact on economic growth, while others have seriously questioned the significance of this result. Likewise studies have been conducted to investigate the impact of trade liberalization and FDI inflow on environment and the results remain inconclusive. There are numerous studies investigating the impact of trade and FDI on economic growth. But few studies exist that have analyzed the joint impact of FDI and trade liberalization policies on environment. The present study fills this gap by introducing explicitly and jointly the two major elements of globalization namely trade liberalization and the inflow of FDI into the analysis. Annual data from 1980 to 2008 from the World Bank data base has been used. To start with, the paper explores the causal relationship between FDI, trade, and Gross Domestic Product (GDP) growth. Also variables are tested for the degree of stationarity and co integration. Then Autoregressive Distributed Lag (ARDL) approach to co-integration techniques has been used to capture the impact of short-run dynamics and long-run equilibrium.
The study finds that economic liberalization policies have been helpful for the growth of the Economy. The growth environment nexus via the Environment Kuznet Curve Hypothesis (EKC) for Malaysia is confirmed by the study. Further, the results do not suggest that trade liberalization policies have directly affected environment. Pollution Heaven hypothesis is also not fully supported by the data.