A Panel Study of the Environmental Kuznets Curve for Carbon Emissions in ASEAN-5 Countries

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1 Goh Han Hwa, You Hu L, Nur Syarah Khan Bnt Beram Khan, Tan Su Hong A Panel Study of the Envronmental Kuznets Curve for Carbon Emssons n ASEAN-5 Countres GOH HAN HWA 1, YOU HUI LI 2, NUR SYAIRAH KHAN BINTI BERAM KHAN 1, TAN SU HONG 2 1 Faculty of Management, Multmeda Unversy, MALAYSIA 2 Faculty of Accountng, Fnance & Busness, Tunku Abdul Rahman Unversy College, MALAYSIA Correspondng author: hhgoh@mmu.edu.my Abstract: - Envronmental degradaton has now been one of top concerns for scentsts, envronmentalsts, polcymakers and people all around the world alke. Carbon doxde (CO 2 ) s beleved to be one of the major components of greenhouse gases that contrbute to ar polluton and thus global warmng and clmate change. Ths research s conducted to nvestgate the relatonshp between economc growth and CO 2 emssons n ASEAN-5 countres n the presence of foregn drect nvestment nflow (FDI) and trade openness for the perod between 1981 and In order to carry out the study, varous tests are appled such as panel un root tests, Pedron panel contegraton test, the Dynamc Ordnary Least Squares (DOLS) and Fully Modfed Ordnary Least Squares (FMOLS) regressons, as well as panel vector error correcton model (PVECM). The results of the study ndcate that the relatonshp between economc growth and CO 2 emssons exsts n nverted-s shape n both short- and long-run for ASEAN-5 countres after controllng two addonal explanatory varables,.e. FDI nflow and trade openness. In addon, the outcome of ths study also offers some fundamental polcy recommendatons to polcymakers. Key-Words: - Carbon doxde emssons, economc growth, Envronmental Kuznets curve, ASEAN-5 countres 1. Introducton Globalzaton s both a motvator and motvaton for economc growth. However, n addon to wealth growth, has also catalysed many other weather events that brng about one of the most promnent concerns of the world at present: global warmng. Scentsts have dscovered that Carbon doxde (CO 2 ) s one of the man gases causng the global warmng problem. Ths has led to the questonng of whether economc growth would worsen the ssue of CO 2 emssons from economsts and envronmentalsts alke, whch pqued the nterests of polcymakers n countres across the world. Over the last three decades, ASEAN-5 countres (Indonesa, Malaysa, the Phlppnes, Sngapore, and Thaland), among others, have seen rapd ndustralzaton wh the hghest economc growth (Lean & Smyth, 2009). Moreover, the ASEAN regon s known to be one of the most trade-orented whn developng countres. They also have a hghly dependent relatonshp wh foregn drect nvestment (FDI) for growth (Intal, Narjoko, & Smorangkr, 2012). Thus, factors such as trade openness and FDI are chosen as controlled varables n ths study. Fg.1. CO 2 emssons (metrc tons per capa) n ASEAN-5 [Source: Worldbank.org] E-ISSN: Volume 13, 2016

2 Goh Han Hwa, You Hu L, Nur Syarah Khan Bnt Beram Khan, Tan Su Hong Fg.1 shows that over the years, the trend of CO 2 emssons n Sngapore has declned rather sharply, whle the other four countres contnue to experence an ncrease, wh the excepton of the Phlppnes. Malaysa seemed to be n the lead among ASEAN-5 n the producton of CO 2. It was reported that Malaysa s one of the top producers of CO 2 gas n the regon of Asa (Lau, Choong, and Eng, 2014). The recent reoccurrences of open burnng of forests for palm ol trees and the producton of bodesel and ol n Indonesa, whch resulted n bad haze that tended to spread over to neghbourng ASEAN countres, have undoubtedly ncreased the CO 2 polluton over the years (Intal, Narjoko, and Smorangkr, 2012). Besdes, Thaland s no excepton and has also experenced an ncreasng trend n s CO 2 emssons. One of the objectves of ASEAN Vson 2020 s to work towards a world class standard and conformance system that wll provde a harmonsed system to faclate the free flow of ASEAN trade whle meetng health, safety and envronmental needs. In other words, the ASEAN Vson 2020 s clamed to safeguard the regon s envronment and sustan s natural resources (ASEAN, 1997). Many of the envronmental problems faced by ASEAN countres are trans-border, whch demands a jont response from ASEAN as a regon. The governments of ASEAN-5 natons need to be aware of the economc factors that contrbute to CO 2 emssons n the ASEAN-5 regon. It s essental for the enactment and mplementaton of the proper strategy or polcy to mprove and therefore sustan the ASEAN-5 s natural envronment n the pursu of economc growth. 2. Lerature Revew The envronmental Kuznets curve (EKC) s a hypotheszed relatonshp between envronmental varables and ncome per capa. In the early stages of economc growth degradaton and polluton ncrease, but beyond some level of ncome per capa the trend reverses, so that at hgh-ncome levels economc growth leads to envronmental mprovement. Ths mples that the envronmental mpact ndcator s an nverted U-shaped functon of ncome per capa (Cohen, 2012; Lau, Choong, & Eng, 2014; Lean & Smyth, 2009). There was also a menton of an N-shaped curve. Curves that are N-shaped may lead to an ncrease n CO 2 emssons alongsde hgh levels of ncome (Mazzant, Montn, & Zobol, 2007). The paper emphaszed that the curves vary for many countres n varous stages of development, and that the onesze fs all assumpton of the EKC s not supported. Ths s presumed because developng and late-developng groups of natons are stll at the begnnng phases of the development process and have yet to reach an approprate ncome level. Polluton s encouraged by the actons of goods processng, whch s caused by greater trade ntensy or trade openness (Hossan, 2012). A study n Tunsa was carred out by Chebb, Ollareaga, and Zouna (2011) and showed that over the last two decades, Tunsa has progressvely become a more open trade system. At the same tme, has attempted to control the level of envronmental degradaton by applyng envronmental reforms. Unfortunately, the posve effects expected of the reforms cannot be seen because of the contnuous rsng of emsson levels of CO 2 from the country, wh the reallocaton of resources shftng more towards pollutng ndustres. In addon, a study conducted n Indonesa also found that trade openness adversely affects the level of CO 2 emssons n the country (Saboor, Sulaman, & Mohd, 2012). However, there are always two sdes of the same con. Trade openness may lead to hgher competon and therefore more pressure on countres partcpatng n trade to use ther resources n a more effcent way so that they can reduce the amount of polluton contrbuton (Lo, 2010). On the other hand, FDI also reduces welfare because may cause a rse n pollutons level. A study carred out by Hassaballa (2014) sgnfed that there s a posve relatonshp between FDI nflows and lax regulatory laws for the envronment. Besdes, Blanco, Gonzalez, and Ruz (2013) carred out a study on the relatonshp between FDI and CO 2 polluton n Latn Amercan countres and they found that FDI dd cause more CO 2 emssons to be produced n these countres. 2. Data and Methodology Instead of dong a sngle-country study, a group of countres (ASEAN-5) s chosen for our study. Usng the panel-based tests enables us to focus on more than one country whch would provde us wh more data and more stably n estmatons (Lean & Smyth, 2009). The technques used n ths study are panel un root tests, panel contegraton E-ISSN: Volume 13, 2016

3 Goh Han Hwa, You Hu L, Nur Syarah Khan Bnt Beram Khan, Tan Su Hong and panel long-run estmates as well as panel VECM (vector error correcton model). The EKC suggests that n the early stages of economc growth envronmental degradaton ncreases, but after a certan level of ncome s attaned, the degradaton decreases and mprovement starts (Markandya et al., 2002). Some studes (Sur and Chapman, 1998) have ncluded a cubc term to determne whether an N-shaped curve s observed after ncome level ncreases sgnfcantly, resultng n reoccurrences of envronmental degradaton due to luxury spendng. Besdes, followng Lau, Choong, and Eng (2014)(for trade openness) and Blanco, Gonzalez, and Ruz (2013) (for FDI), our econometrc model also ncludes trade openness and FDI to reduce specfcaton bas n the econometrc estmaton. In short, ths research utlzes the CO 2 emssons, economc growth n the form of GDP per capa along wh s square and cubc terms, foregn drect nvestment nflow and trade openness. All the varables are transformed nto natural log form. The log-lnear specfcaton can produce more consstent and effcent results than the lnear model. In addon, accordng to Chang et al. (2001), convertng the model nto natural logs can help to nduce statonary n the varance covarance matrx. Hence, the model s estmated as follows: ln CO (1) 2 2 = α + β1 ln GDP + β2 ln GDP + β3 ln + β 4 lntrade + β5 ln FDI + ε GDP where CO 2 s carbon doxde emssons (metrc tons per capa), GDP s GDP per capa whle GDP 2 and GDP 3 are the square and cubc terms of GDP per capa respectvely. TRADE represents the trade openness rato (sum of total exports and mports by the GDP). FDI s foregn drect nvestment nflow. ε s the regresson error term. Ths study utlzes panel data (annual) for ASEAN-5 over the perod , obtaned from the World Bank data base. 2.1 Panel un root tests We use the panel un root tests proposed by Levn, Ln, and Chu (2002), Im, Pesaran, and Shn(2003), Maddala and Wu (1999). By usng more nformaton, panel un root tests are able to amend some sgnfcant flaws of exstng sngle 3 tme seres tests, ncludng low-power and largesze dstortons (Perman & Stern, 2003). The un root test by Levn, Ln, and Chu (2002) has a panel based proposon based on the Augmented Dckey- Fuller (ADF) test whch examnes the presence of homogeney n the dynamcs of the autoregressve coeffcents. Ths s tested for all panel uns wh cross-sectonal ndependence. The t-bar test, whch was proposed by Im et al. (2003), takes the assumpton that all countres converge towards the equlbrum value at dfferent speeds under the alternatve hypothess. The test proposed by Maddala and Wu (1999) takes the form of the Fsher Augmented Dckey-Fuller (F-ADF) test. Ths test, whch s a non-parametrc statstcs suable for small sample szes, uses the p-values of the test statstcs obtaned to check for a un root n each resdual cross-sectonal un. 2.2 Panel contegraton Gven that each of the varables contans a panel un root, we proceed to examne whether there s a long-run relatonshp among the varables usng the panel contegraton test developed by Pedron (1999, 2004). The panel contegraton technque s used to pool nformaton on common long-run relatonshps and, smultaneously allow for short-run dynamcs and fxed effects to be heterogeneous across the dfferent members of the panel. The test statstcs are computed usng the resduals of the hypotheszed contegratng regresson of Equaton (1), wh tests on the null of no contegraton based on the resduals εˆ as follows: ˆ ε ρ ˆ ε + (2) =, t 1 µ Snce the α and the varous β of Equaton (1) are permted to dffer across the members of the panel, ths approach allows for consderable short- and long-run heterogeney. Based on the contegratng resduals, ε, Pedron (1999, 2004) develops seven panel contegraton statstcs. Four of these statstcs, named panel contegraton statstcs, are whn-dmenson-based statstcs constructed by totalng both the numerator and the denomnator terms over the N dmenson separately. Meanwhle, the other three statstcs, called group mean panel contegraton statstcs, are between-dmenson-based statstcs constructed by dvdng the numerator by the denomnator pror to totalng over the N dmenson. In terms of power, E-ISSN: Volume 13, 2016

4 Goh Han Hwa, You Hu L, Nur Syarah Khan Bnt Beram Khan, Tan Su Hong Pedron llustrates that the group-adf (augmented Dckey Fuller) statstc generally performs best followed by the panel-adf statstc, whle the panel varance and group statstcs do poorly. 2.3 Panel long-run estmates Dynamc Ordnary Least Squares (DOLS) To acqure an unbased estmator of the longrun parameters of Equaton (1), ths study uses the dynamc ordnary least squares (DOLS) estmator proposed by Kao and Chang (2000). The DOLS estmator s an extenson of Stock and Watson s (1993) estmator, whch enhances the statc regresson wh the leads, lags, and contemporaneous values of the regressors n the frst dfferences. Consder a panel model wh fxed effect: y = α + x β + µ, = 1,..., N; t = 1,..., T (3) where y s a matrx (1, 1), β s a vector of slopes (k, 1) dmenson, αs an ndvdual effect, and µ s an error term. We presume that the x (k, 1) vector s an autoregressve process of the frst order dfference: x = 1 + ε (4) x The DOLS estmator s obtaned from the followng equaton: y j = q2 1β + cjx + j + j = q1 = α + x v (5) where c s the coeffcent of a lead or lag of frst dfferenced explanatory varables Fully Modfed Ordnary Least Squares (FMOLS) In addon to DOLS, the FMOLS method proposed by Pedron (2001) s also utlzed n the present study to attan the panel data estmates for Equaton (1). Ths method apples the semparametrc correcton nto the ordnary least squares estmator to exclude bas caused by endogeney of the regressors. The group mean panel FMOLS t-statstcs for β s as follows: N T 1/ 2 T 1 = N Lˆ 1 ˆ 11 NT τˆ 1 β = 1 t= 1 t= 1 t y = 2 ( x x ) ( x x ) y T N( 0, ) y 21 where ( ) τ Γ 21 y x 0 ( Γ + ˆ ) (6) (7) where the ˆ and Γˆ are covarances and sums of autocovarances procured from the long-run covarance matrx for Equaton (1), and the assocated t-statstc follows standard normal dstrbuton. 2.4 Panel Vector Error Correcton Model (PVECM) Once contegraton s proved to exst n the model, the PVECM s used to fnd out the drecton of causaly among the varables employed n the study. LCO2 LLLLLLLLLLLL αα 1 ββ 11pp ββ 12pp ββ 13pp ββ 14pp ββ 15pp ββ 16pp LCO2 pp αα 2 ββ 21pp ββ 22pp ββ 23pp ββ 24pp ββ 25pp ββ 26pp LLLLLLLLLLLL pp rr LLLLLLLLLLLL2 = αα 3 ββ 31pp ββ 32pp ββ 33pp ββ 34pp ββ 35pp ββ 36pp LLLLLLLLLLLL2 pp LLLLLLLLLLLL3 αα + 4 ββ 41pp ββ 42pp ββ 43pp ββ 44pp ββ 45pp ββ 46pp LLLLLLLLLLLL3 pp TTTTTTTTTT αα 5 FFFFFF αα 6 pp=1 ββ 51pp ββ 52pp ββ 53pp ββ 54pp ββ 55pp ββ 56pp TTTTTTTTTT pp ββ 61pp ββ 62pp ββ 63pp ββ 64pp ββ 65pp ββ 66pp FFFFFF pp 1 2 εε 1 εε EEEEEE 1 + εε 3 4 εε 4 5 εε 5 6 εε 6 (8) where s the frst dfferenced operator, ECT s the error correcton term, p represents lag length, and ε s the serally uncorrelated error term. Usng the least squares estmator, the panel VECM equatons are estmated. The optmal lag length s chosen usng the vector autoregressve (VAR) lag length crera, whch s the Schwarz and Akake nformaton crera. Whle the short-run causaly s determned by the statstcal sgnfcance of the partal F-statstc of the rght hand sde varables, the long run causaly s determned by the sgnfcance of the error-correcton terms usng a t- test. 3. Results E-ISSN: Volume 13, 2016

5 Goh Han Hwa, You Hu L, Nur Syarah Khan Bnt Beram Khan, Tan Su Hong 3.1 Panel un root tests Accordng to Table 1, the panel un root tests on average ndcate that all varables are nonstatonary at level. However, after takng the frst dfference, all the varables become statonary at 1%. Table 1: Panel Un Root Tests Test/ varabl e Lev el Levn, Ln & Chu Frst dfferen ce Lev el IPS Frst dfferen ce Lev el ADF-Fsher Frst dfferenc e CO GDP GDP GDP TRADE FDI Notes: denote rejecton of the null hypothess of nonstatonary at 1% level of sgnfcance. The maxmum number of lags s set to be three. SBC s used to select the lag length. 3.2 Panel contegraton Referrng to Table 2, both models of 2a and 2b show that four out of seven statstcs reject the null hypothess of no contegraton among the varables. For panel v-stat, the result s sgnfcant wh trend and ntercept. Whle the panel v-stat statstcs show sgnfcance at 5%, the others are sgnfcant at 1%. The outcome of the Pedron contegraton test supports that there s a contegratng relatonshp among the varables. Table 2: Results of Pedron Panel Contegraton Test (Dependent varable: CO 2 emssons n metrc tons per capa) Model 2a: Whout Trend Model 2b: Wh Trend Whn Dmenson Panel v-stat Panel rho-stat Panel pp-stat Panel ADF-stat Between Dmenson Group rho-stat Group pp-stat Group ADF-stat Note: and denote rejecton of the null of nonstatonary at 5% and 1% levels of sgnfcance respectvely 3.3 Panel long-run estmates (DOLS and FMOLS) Models 1 and 2 n the Table 3 below present the results of long-run relatons between economc growth and CO2 emssons n the presence of trade openness and FDI. In general, the results are que smlar and robust except that FDI s nsgnfcant n Model 2. Accordng to the fndngs, the CO 2 emssons exhb an nverted-s shaped curve where the emsson levels frst decrease and then ncrease when ncomes reach a hgh level, but decrease agan at hgher levels of ncome. Ths s ndcated by the sgnfcant negatve sgn of GDP followed by the sgnfcant posve GDP 2 and then sgnfcant negatve GDP 3. As for the trade openness varable, the outcome of both models s posve and statstcally sgnfcant. Nevertheless, FDI suggests a posve and statstcally sgnfcant relatonshp wh CO 2 emssons n Model 1 but nsgnfcant n Model 2. Table 3: Results of DOLS and FMOLS Estmatons (Dependent varable: CO2 emssons n metrc tons per capa) Model 1: DOLS (Lag = 1, Lead = 2) Model 2: FMOLS Real GDP per capa (lngdp) ( ) ( ) Square of Real GDP per capa (lngdp 2 ) ( ) ( ) Cube of Real GDP per capa ( ) ( ) (lngdp 3 ) Trade Openness (lntrade) ( ) ( ) FDI Inflow (lnfdi) ( ) ( ) Notes:, and denote the levels of sgnfcance at 10%, 5% and 1% respectvely. Fgures n parentheses are t-statstcs. 3.4 Panel Vector Error Correcton Model (PVECM) Table 4 shows the panel causaly test results based on Model 2 - FMOLS. It can be seen that there s a undrectonal relatonshp from GDP, GDP 2, and GDP 3 to CO 2 emssons and trade openness, respectvely. On the other hand, trade openness Granger causes FDI. These lnkages are summarsed n Fg.2. Besdes, the results shown n the Table 4 ndcate that there s a long run Granger causaly runnng from economc growth, trade openness and FDI to CO 2 emssons due to s error correcton term (ECT) beng sgnfcant at 1%. E-ISSN: Volume 13, 2016

6 Goh Han Hwa, You Hu L, Nur Syarah Khan Bnt Beram Khan, Tan Su Hong Fg.2 Causaly Dagram Table 4: Panel Vector Error Correcton Model (FMOLS) Dep. varable CO2 GDP CO GDP F-statstcs GDP ECT TRADE FFFFFF Coef t-stat GDP GDP GDP TRADE FDI Note: and denote rejecton of the null of nonstatonary at 5% and 1% levels of sgnfcance, respectvely. 4. Concluson Ths study has used panel un root tests, panel contegraton, Dynamc Ordnary Least Squares (DOLS), Fully Modfed Ordnary Least Squares (FMOLS), and panel vector error correcton model (PVECM) to examne the relatonshp between economc growth and CO 2 emssons n ASEAN-5 countres n the presence of foregn drect nvestment (FDI) and trade openness from 1981 to After controllng the trade openness and foregn drect nvestment (FDI) varables, the results of our study show that an nverted-s shaped relatonshp does exst between economc growth and CO 2 emsson n both short-run and long-run for ASEAN-5 countres. Referrng to Fg.1 - CO 2 emssons (metrc tons per capa) n the ASEAN-5 countres, all ASEAN-5 seem to be on the uptrend except Sngapore. Accordngly, s most lkely that Sngapore s on the downward slopng area of the nverted-s shaped curve at hgher levels of ncome whle the other 4 countres may be on the upward slopng area. Based on the PVECM results, economc growth does nfluence both CO 2 emssons and trade openness whle trade openness nfluences FDI n ASEAN-5 countres. In the process of achevng economc development, ASEAN-5 s generally bearng the consequence n the form of CO 2 polluton. The drecton and strength of causaly between growth- CO2, growth-trade, and trade-fdi can ad n fashonng polces to boost foregn nvestments and trade n a more eco-frendly approach. The exstence of the nverted-s shaped curve ndcates that there s a need for ASEAN-5 to step up ther efforts to reduce CO 2 emssons n the future. ASEAN-5 economes may consder regonal agreement as an n-house soluton to ths matter. Polcy makers of ASEAN-5 countres can encourage local frms to nvest n envronmentally frendly technologes va tax exemptons. The tax exclusons can also be made vald for foregn nvestors lookng to set up subsdares or factores n ASEAN-5 countres, wh the condon that they brng n green technology that would be less harmful to the envronment. Addonally, government spendng on research and development of greener technologes can be ncreased to boost the motvaton of creatng and nnovatng ecofrendly tools. Last but not least, ASEAN-5 countres can jon forces through collaboraton and come up wh the suable parameters to curb carbon emssons whle generatng economc growth for the countres. References: [1] ASEAN. (15 December, 1997). ASEAN Vson Retreved from Assocaton of Southeast Asan Natons: [2] Blanco, L., Gonzalez, F., & Ruz, I. (2013). The Impact of FDI on CO2 Emssons n Latn Amerca. Oxford Development Studes, Vol. 41, No. 1, pp [3] Chang, T., Fang, W., & Wen, L.F. (2001). Energy consumpton, employment, output and temporal causaly: evdence from Tawan based on contegraton and errorcorrecton modellng technques. Appl. Econ., 33, pp [4] Chebb, H. E., Ollareaga, M., & Zouna, H. (2011). Trade Openness and CO2 Emssons n Tunsa. Mddle East Development Journal, Vol. 3, No. 1, pp [5] Cohen, D. (2 November, 2012). The Close Relatonshp between Economc Growth E-ISSN: Volume 13, 2016

7 Goh Han Hwa, You Hu L, Nur Syarah Khan Bnt Beram Khan, Tan Su Hong and Carbon Emssons. Retreved from Ol Prce: Economy/The-Close-Relatonshp- between-economc-growth-and-carbon- Emssons.html. [6] Hassaballa, H. (2014). The Effect of Lax Envronmental Laws on Foregn Drect Investment Inflows n Developng Countres. Journal of Emergng Trends n Economcs and Management Scences (JETEMS), Vol. 5, No.3, pp [7] Hossan, S. (2012). An Econometrc Analyss for CO2 Emssons, Energy Consumpton, Economc Growth, Foregn Trade and Urbanzaton of Japan. Low Carbon Economy, pp [8] Im, K.-S., Pesaran, H., & Shn, Y. (2003). Testng for un roots n heterogenous panels. Journal of Econometrcs,115, pp [9] Intal, P., Narjoko, D., & Smorangkr, M. (11-12 October, 2012). ERIA Study to Further Improve the AEC Scorecard: Investment Lberalzaton and Faclaton. Lao: Economc Research Instute for ASEAN and East Asa (ERIA). Retreved fromhttp:// tmentfordevelopment/ pdf. [10] Kao, C., & Chang, M.H. (2000). On the estmaton and nference of a contegrated regresson n panel data. Advances n Econometrcs, 15, pp [11] Lau, L.-S., Choong, C.-K., & Eng, Y.-K. (2014). Investgaton of the envronmental Kuznets curve for carbon emssons n Malaysa: Do foregn drect nvestment and trade matter? Energy Polcy, pp [12] Lean, H. H., & Smyth, R. (2009). CO2 Emssons, Electrcy Consumpton and Output n ASEAN. Australa: Department of Economcs, Monash Unversy. [13] Levn, A., Ln, C., & Chu, C. (2002). Un root tests n panel data: Asymptotc and fnesample. Journal of Econometrcs, 108, pp [14] Lo, N. D. (2010). The mpact of trade lberalzaton on the envronment n some East Asan countres: an emprcal study. 22 nd CEA annual conference. [15] Maddala, G., & Wu, S. (1999). A comparatve study of un roots wh panel data and a new smple test. Oxford Bulletn of Economcs and Statstcs, 61, pp [16] Markandya, A., Harou, P., Bellu, L.G., &Cstull, V. (2002). Envronmental Economcs for Sustanable Growth. Edward Elgar, Cheltenham. [17] Mazzant, M., Montn, A., & Zobol, R. (2007). Economc Dynamcs, Emsson Trends and the EKC Hypothess: New Evdence Usng NAMEA and Provncal Panel Data for Italy. Mlan: CCMP Clmate Change Modellng and Polcy. [18] Pedron, P. (1999). Crcal values for contegraton tests n heterogeneous panels wh multple regressors. Oxford Bulletn of Economcs and Statstcs, 61: 1, pp [19] Pedron, P. (2001). Fully modefed OLS for heterogeneous contegrated panels. Advances n Econometrcs, 15, pp [20] Pedron, P. (2004). Panel contegraton: asymptotc and fne sample propertes of pooled tme seres tests wh an applcaton to the PPP hypothess. Econometrc Theory, 20:3, pp [21] Perman, R., & Stern, D. I. (2003). Evdence from panel un root and contegraton tests that Envronmental Kuznats Curve does not exst. The Australan Journal of Agrcultural and Resource Economcs, 47:3, pp [22] Saboor, B., Sulaman, J., & Mohd, S. (2012). An Emprcal Analyss of the Envronmental Kuznets Curve For CO2 Emssons n Indonesa: The Role of Energy Consumpton and Foregn Trade. Internatonal Journal of Economcs and Fnance, Vol. 4, No. 2, pp [23] Stock, J., & M. Watson A Smple Estmator of Contegratng Vectors n Hgher Order Integrated Systems. Econometrca, Vol. 61, No. 4, pp [24] Sur, V., & Chapman, D. (1998). Economc growth, trade and energy: mplcatons for the envronmental Kuznets curve. Ecolog. Econ., 25, pp E-ISSN: Volume 13, 2016