The nexus of oil consumption, CO 2 emissions and economic growth in China, Japan and South Korea

Abstract

This article attempts to explore the nexus between oil consumption, economic growth and carbon dioxide (CO₂) emissions in three East Asian oil importing countries (i.e. China, South Korea and Japan) over the period 1980–2013, by using the Granger causality, Johansen cointegration test, Generalised Impulse Response functions (GIRF) and variance decompositions. The empirical findings provide evidence for the existence of a long-run relationship between oil consumption and economic growth in China and Japan. The results also point to a uni-directional causality from running from oil consumption to economic growth in China and Japan, and from oil consumption to CO₂ emissions in South Korea. The overall results of GIRF reveal that while economic growth in China and South Korea shows a positive response to oil consumption, this variable responses negatively to the same shock in Japan. In addition, oil consumption spikes cause a negative response of CO₂ emissions in Japan and China, as well as a U-shape response in South Korea.

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