Ensuring the balance between economic performance and environment: A dynamic autoregressive distributed lag model approach

TEMELLİ S.

EKOIST-JOURNAL OF ECONOMETRICS AND STATISTICS, sa.43, ss.204-218, 2025 (ESCI, TRDizin)

Özet

The rise in global carbon emissions has become a critical issue, accelerating climate change and contributing to the deterioration of ecosystems. Environmental degradation is closely linked to changes in economic activity, making it essential to examine the relationship between macroeconomic performance and the environment. This study investigates the effects of macroeconomic indicators on environmental degradation in T & uuml;rkiye by analysing annual data from 1990 to 2020. To capture both short-and long-term dynamics, the autoregressive distributed lag (ARDL) bounds test and the dynamic ARDL approach were applied. Dynamic analysis reveals that economic-environmental relationships can be temporary or cyclical, that the results must be interpreted with caution. Therefore, ARDL outcomes should be evaluated togetherwith dynamic simulations to gain a more comprehensive understanding.The comparative results of the two models highlight several important findings. In the ARDL model, both foreign direct investment(FDI) inflows and gross fixed capital formation significantly affect environmental degradation in the short and long term. However, in the dynamic ARDL model, these variables show significant effects only eventually. The simulation results further demonstrate that a 10% positive shock in FDI inflows leads to higher environmental degradation, supporting the pollution haven hypothesis. In terms of economic growth, the ARDL model results indicate short-term increase in environmental degradation, although this relationship is not statistically significant in the dynamic ARDL framework Overall, the findings underline the long-run risks of rising gross fixed capital formation, highlighting the need for Turkiye to adopt a green economy perspective, integrating environmental concerns into investment and growth policies.