The Linkage between Trade Openness and Environmental Quality: New Insights from Developing Countries

Abstract

Whether does trade openness appear to be bad or good to the environment? The question is of great interest in international debates on climate change and environmental pollution. The results from the empirical and theoretical literature are largely inconclusive and controversial about the overall linkage between trade openness and environmental quality. The aim of this paper is to examine the possible linkage between trade openness and the environmental quality with a panel data of 53 developing countries over the period 1991-2016. In which, the research evaluates the relationship between trade openness and CO2 emissions from 1991 to 2014 and the trade openness and PM2.5 nexus between 2010 and 2016 by employed Panel vector autoregression (PVAR)along with System-GMM methods. Results indicate that there was only one-way direction causality arisen from both CO2 emissions and PM2.5 as proxies of environmental quality to trade openness.Additionally, there was no evidence of the impact of trade openness on environmental quality in developing countries. Therefore, policymakers in developing countries should control environ-mental quality through efficientlyutilizing clear and green energy to sustain their economic growth in the wake of international economic integration.