Bootstrap ARDL on Health Expenditure, CO2 Emissions, and GDP Growth Relationship for 18 OECD Countries

Abstract

Using annual time-series data over the period 1975-2017, the researcher applied the bootstrap autoregressive-distributed lag (ARDL) cointegration model developed by McNown et al. (1) to examine whether there is a long run relationship among health expenditure, CO₂ emissions, and gross domestic product (GDP) per capita in 18 Organization for Economic Cooperation and Development (OECD) countries. We find cointegration exists in Netherlands when real GDP per capita serves as a dependent variable, in New Zealand when health expenditure is the dependent variable, and in the United States when CO₂ emissions are dependent variables. The main results show evidence of a short run relationship between the three variables. The empirical results support that there is a bidirectional causality between health expenditure and GDP growth for Germany and the United States, between CO₂ emissions and GDP growth for Canada, Germany, and the United States, and between health expenditure and CO₂ emissions for New Zealand and Norway. The results also indicate that there are unidirectional causality in other countries.

Keywords: CO2 emissions; GDP growth; bootstrap ARDL; health expenditure; long run relation.