Asymmetric effect of political stability on production-based CO2 emissions in the UK: long-run evidence from nonlinear ARDL and frequency domain causality

Abstract

The study deals with the effect of political stability on environmental degradation in the long run for the United Kingdom (UK). For this aim, the political stability effect on production-based carbon dioxide (CO2) emissions is examined by considering trade openness, renewable energy, and economic growth and using quarterly data between 1995/Q1 and 2018/Q4. Nonlinear autoregressive distributed lag (NARDL), which allows the researcher to measure the asymmetric impact of explanatory indicators positively or negatively, is performed as the empirical approach. Also, Breitung & Candelon (BC) frequency domain causality test is applied to measure the causality effect of explanatory variables on CO2 emissions. The results reveal that (i) political stability has a statistically significant effect on production-based CO2 emissions and positive shocks have a higher power than negative shocks; (ii) economic growth has an increasing effect, whereas renewable energy has a decreasing effect on production-based CO2 emissions; and (iii) there is frequency domain causality from political risk, economic growth, renewable energy consumption, and trade openness to production-based CO2 emissions. Hence, empirical results highlight the asymmetric effect of political stability on environmental degradation in the long run for UK. Thus, UK policymakers should consider political stability in policy development and implementation process for limiting CO2 emissions in the long run.