Environmental Kuznets Curve and Trade Openness in Turkey: Bootstrap ARDL Approach with a Structural Break

Abstract

In this study, the validity of the environmental Kuznets curve (EKC) hypothesis is examined with the newly developed bootstrap autoregressive distributed lag (ARDL) approach by incorporating the effects of trade openness for Turkey from 1969 to 2017. The bootstrap ARDL approach results show that there is a long-run relationship between per capita carbon dioxide (CO2) emissions, per capita real income, and trade openness in the presence of one structural break. The results of the long-run estimators indicate that the inverted U-shaped EKC hypothesis is valid, and trade openness has an increasing impact on CO2 emissions. However, Turkey has not yet reached the level of income necessary to reduce pollution. The results of the Fourier Toda-Yamamoto Granger causality test also show that unidirectional causality runs through per capita real income and trade openness to per capita CO2 emissions. In addition to these findings, it has been determined that the decrease in growth rate and production experienced during the 2001 financial crisis in Turkey reduced environmental pollution in both the short and long runs. Consequently, these results show that the scale and composition effects outweigh for economic growth and trade openness in Turkey.