Assessing the Role of Agriculture and Energy Use on Environmental Sustainability: Evidence from RALS Cointegration Technique

Abstract

This study is relevant towards determining the ability of Turkey in mitigating environmental degradation which is one of the major areas of concern. Therefore, we aimed to examine the linkage among agriculture, energy use, economic performance and FDI with environmental sustainability. To this end, ecological footprint has been considered as a more comprehensive and reliable indicator to measure the level of environmental degradation. This relationship has been investigated with different approaches such as the Residual Augmented Least Squares Augmented Dickey -Fuller (RALS-ADF), Residual Augmented Least Squares Engle and Granger (RALS-EG) and leveraged bootstrap causality test for the period from 1970 to 2017. The RALS procedure was utilized to analyze the stationarity level of each variable and their cointegration relationship. The findings confirmed that all the variables investigated have cointegration relationship and have positive and statistically significant effect on environmental degradation in Turkey. The results of leveraged bootstrap causality test showed that there are bidirectional causal relationships of environmental sustainability with agriculture sector as well as FDI and economic performance. Moreover, the unidirectional causal relationship runs from environmental degradation to energy use and from FDI to economic performance and agriculture sector. The other unidirectional causal relationship running from agriculture sector to energy use and from economic performance to energy use. Also, our findings confirmed the inverted U-shaped EKC hypothesis for the relationship of economic performance and environmental sustainability. Therefore, our findings provide insights for policymakers to consider investigated variables as a surest way to have environmental sustainability.Keywords: Agriculture, FDI, Energy consumption, RALS cointegration, TurkeyJEL Classifications: Q43. F64. C32DOI: https://doi.org/10.32479/ijeep.11842