Asymmetric and time-varying linkages between carbon emissions, globalization, natural resources and financial development in China

Ling, Gao; Razzaq, Asif; Guo, Yaqiong; Fatima, Tehreem; Shahzad, Farrukh

In the real world, economic covariates follow asymmetric and time-varying patterns. Therefore, it is imperative to integrate these effects while estimating environmental and economic relationships. Although prevailing literature reveals various emissions-deriving and eliminating factors, however, there is a dearth of empirical evidence that estimates the asymmetric and time-varying effect of globalization, natural resources, and financial development from a multidimensional perspective in China. In doing so, we employ the nonlinear autoregressive distributed lag (NARDL) and cross-wavelet modeling framework to explore the long- and short-run nonlinear and time-variant association between globalization, natural resources, financial development, and carbon emissions from 1980 to 2017. The NARDL method has the benefit of discriminating the long-term and short-term asymmetric carbon emission responses due to a positive and negative shock in our primary variables of interest. Mainly, the findings of NARDL estimations confirm that positive shocks in globalization and financial developments have a significant positive impact on carbon emissions, whereas negative shock in natural resources has a significant positive impact on carbon emissions. Similarly, the outcomes of continuous wavelet transformation and wavelet transformation coherence confirm the causal linkages between covariates; however, this effect varies across different time and frequency domains. These results imply that environmental researchers should consider asymmetric transmission channels and time–frequency associations among variables to devise long-term sustainable policies.