Testing the EKC hypothesis in India: moderating role of trade openness

What the paper says

Purpose This paper will analyze the environmental degradation in India for a period over 1965–2022 by revisiting the Environmental Kuznets Curve (EKC) incorporating gross domestic product, energy consumption and trade openness as the major determinants of such a degradation. Besides, the study also explored the moderating role of trade openness via the EKC channel. Design/methodology/approach The study used auto regressive distributed lag (ARDL) model as an estimation technique. Also the study employed fully modified ordinary least squares (FMOLS) and dynamic Ordinary Least Squares (DOLS) to check robustness of the results. Lastly, the study used Granger causality and Toda Yamamoto tests to ascertain causality among the variables. Findings Our results reveal an inverted N-shaped Kuznets Curve in Indian context. Also, we find significant negative impact of primary energy consumption on the environmental quality and significant positive impact of trade openness on environmental quality. In addition, we find significant moderating role of trade openness on the Environment Kuznets curve. Originality/value To the best of author’s knowledge no prior study has been conducted which examines the moderating role of trade openness on the relationship between GDP, energy consumption and environmental degradation in the Indian context. Further the analysis is run on the latest data available by incorporating the nonlinear dynamics of EKC hypothesis for the investigation of more complex relationships, such as multiple turning points in the growth-environment nexus.