Long-run causal relationship between economic growth, transport energy consumption and environmental quality in Asian countries: Evidence from heterogeneous panel methods

This paper analyzes data from 18 Asian countries, spanning from 1980 to 2017 to determine panel long-run causality between income growth, transport energy consumption and environmental quality. The empirical methodology of this paper considers structural breaks and cross-sectional dependence issues. In this way, our study becomes one of the few energy-GDP studies that address cross-sectional dependence in the unit root, cointegration, causality and elasticity estimation. We attempt to fill the gap in energy literature by using robust estimates in the case of Asian countries. After these methodological advances, a bi-directional long-run Granger causality between transport energy consumption, environment and GDP growth is found. The common correlated effects mean group (CMG) is used to obtain long-run elasticities. It is revealed that a 1% increase in transport energy consumption and GDP growth deteriorate environmental quality by about 0.57% and 0.46% respectively in Asian countries. Furthermore, the magnitude of elasticities varies from country to country. The empirical findings add new dimensions in energy-efficient technologies in the transport sector that positively affect economic growth without compromising environmental quality.