Abstract
This study examines the link between environmental indicators and output volatility
unlike the previous literature that mainly emphasized the importance of carbon emissions
and economic growth nexus. Output uncertainty is considered a serious global issue as it
undermines economic gains and quality of life. This study scrutinizes the impact of
greenhouse gas emissions on output volatility in 155 countries over the period 1971-
2017. The empirical analysis is based on Pooled Ordinary Least Squares, Random and
Fixed Effects Models. The empirical results confirm that carbon dioxide (CO2), nitrogen
oxide (NOX), methane (CH4), and total greenhouse gas (GHG) emissions are positively
contributing to amplify global output volatility. Moreover, the Principal Component
Analysis (PCA) of pollutant indicators also confirms the main results. Comparatively
carbon emissions are contributing more to augment output volatility. A comparative
analysis also reveals that all pollutants augment output volatility more in agricultural
economies. The results of Granger causality confirm the bidirectional causality between
environmental degradation and output volatility providing an evidence of endogeneity
problem. To address it, the system GMM estimator is used by incorporating the
instruments in output volatility model and the results of system GMM are also consistent
with main findings. Findings of the study imply that a promising path of sustainable
growth can be achieved by adopting the alternative ways of energy resources that
produce less pollutant relative to greenhouse gasses.
Muhammad Tariq Majeed, Maria Mazhar. (2019) Environmental Degradation and Output Volatility: A Global Perspective, Pakistan Journal of Commerce and Social Sciences, Volume 13, Issue 1.
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