# Benefits Of A Long Run Relationship Between Gdp Per Capita And Ghg Emission

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In this section, we first use unit root test to select countries that are suitable for bonds test. Then, bonds test is carried out to determine the existence of a long-run relationship between GDP per capita and GHG emission per capita. Next, if the result of bonds test is inconclusive, we employ Engle and Granger cointegration test to determine whether a long-run relationship exist. Once the existence of a long-run relationship is tested, we proceed to find out parameters and turning points. 5.1 Cointegration Analysis and Error Correction Term We first use Augmented Dickey Fuller unit root test to check stationarity of variables at their level and at their first difference. In Table 2, we list the results of tested integrated orders…show more content…
Insert Table 2 here We carry out the bonds test several times including up to four lags. There is evidence that the ARDL F-statistics is sensitive to the lag order, so we select lag order based on minimum value of Akaike Information Criteria (AIC) for it is a consistent model-selector. If AIC are close in two models, we use BIC as the selection criteria. After obtaining the optimal lag order, we calculate the F-statistics of the ARDL model. We list selected lags for each country and the F-statistics for the corresponding models in Table A1 (production-based analysis) and Table A2 (consumption-based analysis) in Appendix. As shown in Tables A1 and A2, some countries allow for the existence of a long-run relationship in more than one functional form. In those cases, we need to determine the functional forms together with the long-run relationship parameters estimated by Equation (4). We will check (i) whether the parameters are significant; (ii) whether turning pints of is inside of the sample; (iii) whether cubic forms has only tiny decreasing sections and approach linear models; (iv) whether the error of Equation (3) is serially uncorrelated and the model is stable. Table A3 in Appendix lists the ECT estimation for long-term relationships with three functional forms and the optimal functional form that we selected based on the bonds test and ECT estimation. In 77 countries, a relationship between GDP per capita and GHG emissions is detected, either with