Authors: KHALID ALKHATHLAN, MUHAMMAD QAISER ALAM and MUHAMMAD JAVID

Abstract

This paper applied the ARDL and VECM test techniques on economic growth, CO2 emissions, energy consumption and the employment ratio to establish the long run and short run relationships between these variables in Saudi Arabia. The results show that there are long run and short run relationships among the variables in the model. The estimated elasticity coefficients of CO2 emissions, energy consumption, and employment ratio have positive and significant impacts on GDP in the long run. The results for direction of causality indicate that neither carbon emissions per capita nor energy consumption per capita cause GDP per capita, but employment ratio causes GDP per capita in the short run. On the basis of our empirical findings, it can be concluded that energy conservation policies and controlling carbon dioxide emissions, are likely to have no adverse effect on economic growth in Saudi Arabia in the short run. However, the long run income elasticity of carbon emissions is greater than the short run income elasticity of carbon emissions, which implies that in the long run income leads to greater carbon dioxide emissions in the country.

Keywords: GDP; CO2; energy; causality; ARDL; VECM.

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