LINEAR AND NONLINEAR LINKAGES BETWEEN EXHAUST POLLUTANT EMISSIONS, CO2 AND STOCK RETURNS IN CHINA
Abstract
This paper examines the effect of stock returns on exhaust pollutant emissions and CO2 emissions, considering the long run and short run perspectives. In doing so, the nonlinear ARDL (NARDL) methods is utilized and the datasets are covering from 2002 Q1 to 2018 Q4. The empirical findings based on NARDL results suggest that negative stock return shock is significant determinant of environmental quality variables but the positive stock return is insignificant. This suggests that the effect of stock return on environmental quality is subject to positive and negative stock returns. The lower stock return is associated with lower exhaust pollutant emissions and CO2 emissions. The impact of stock return on exhaust pollutant emissions and CO2 emissions come from negative stock return shock, and the short run impact is smaller than the long run. The quantile regression results demonstrate that at low and high exhaust pollutant emissions levels, stock return is insignificant. Nevertheless, at the middle exhaust pollutant emissions level, stock return is statistically significant in increasing exhaust pollutant emissions. The same finding is also detected when the CO2 emissions variable is used in the quantile regression.
Keyword : Exhaust Pollutant Emissions, CO2, Stock Return, China, NARDL.
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