Determinants of the CO2 emissions, economic growth, and ecological footprint in Pakistan: asymmetric and symmetric role of agricultural and financial inclusion

Abstract

In this study, the effects of financial inclusion (FI), agricultural innovation (AI), trade (TR), and forest rent (FR) on carbon dioxide emissions (CO₂), economic growth (Y), and ecological footprint (EFP) for Pakistan from 1970 to 2017 are examined using symmetric and asymmetric cointegration approaches. These links are investigated using linear and non-linear autoregressive distributive lag (NARDL) techniques. In contrast to the asymmetry results, the symmetric results revealed no cointegration among the variables over the long run. Moreover, asymmetry results from the Y-model indicated that a positive shock in AI significantly affects Y over the long run while raising it over the short term. Furthermore, CO₂ rises in the wake of positive shocks like AI, Y, and FR but falls in the wake of adverse shocks. A negative shock to FI raises CO₂ temporarily, whereas a negative shock to FR causes CO₂ emissions to fall over time. According to the EFP-model, long-term EFP is decreased by both positive shocks to AI and adverse shocks to FR with one-period lags. On the other hand, positive shocks to FI and FR cause the short-term EFP to rise. In addition to a bidirectional causal relationship between Y, EFP, and FI, we found a one-way causative relationship between Y, FR, AI, CO₂, and EFP. The FMOLS estimator also supports NARDL estimations. The key recommendations to help Pakistan keep its environment and economy are to enhance green mechanization in agriculture, allocate adequate research and development funds, and initiate integrated environmental and economic growth policies by relevant institutions.

Keywords: ARDL and NARDL; Agricultural innovation; CO2 emissions; Ecological footprint; Financial inclusion; Pakistan.