Persistence of Shocks on Environmental Degradation in Oil-Exporting Countries: Implications for Environmental Policymaking

Abstract

The objective of this study is to investigate policy shocks to the ecological footprints of 33 oil-exporting countries for the period 1961-2017. For this purpose, we apply the panel stationarity tests with both sharp and smooth breaks developed by Bahmani-Oskooee et al. (2014) and Carrion-i-Silvestre et al. (2005) to test the persistence of shocks on environmental degradation. The overall results suggest that shocks to the ecological footprint as an indicator of environmental degradation in oil-exporting countries have temporary effects. In other words, the ecological footprint under the two assumptions of long-term homogeneous variance and long-term heterogeneous variance has a mean-reverting behavior. The results of the univariate test also reveal that the ecological footprint is stationary at a 10% significance level for all oil-exporting countries except Canada, Congo, Egypt, Indonesia, and Iran. This implies that policymakers should design effective long-run policies to reduce the ecological footprint in these countries.

Keywords

• permanent and temporary shocks
• ecological footprint
• panel unit root test
• oil-exporting countries