Dynamic relationships among environmental quality, economic growth, and trade: A panel VAR analysis of Asia-Pacific economies

Abstract

Type of the article: Research ArticleAbstractThis study examines the dynamic relationships among environmental quality, economic growth, and trade across a sample of Asia-Pacific economies during the period 2000–2024. While previous studies have extensively investigated the links between economic growth, trade, and environmental degradation, relatively limited attention has been devoted to examining these variables simultaneously within a dynamic multivariate framework. To address this gap, the study employs a Vector Autoregression (VAR) approach to analyze the interdependencies among economic and environmental indicators. Environmental quality is represented by CO2 emissions, land-use change, biocapacity, and ecological footprint, while economic activity and trade are measured using GDP and trade indicators. The empirical results reveal significant dynamic relationships among economic growth, trade, and environmental variables. The estimated coefficients indicate substantial persistence across several economic and environmental indicators, suggesting important temporal dependencies within the system. The impulse response analysis further shows that shocks originating from environmental variables generate measurable responses in economic indicators, while economic disturbances are also associated with subsequent changes in environmental conditions. In addition, the stability analysis indicates that the estimated VAR system satisfies the stability condition over the sample period. The findings suggest that economic growth, trade activity, and environmental quality evolve within an interconnected dynamic framework. These results contribute to the literature on environmental–economic interactions and highlight the importance of incorporating environmental considerations into broader economic and trade policy discussions aimed at supporting long-term sustainable development.AcknowledgmentThe funding for this research was provided by Universitas Hasanuddin. We would like to express our sincere gratitude to the university for their generous support, which made this study possible.

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