Pakistan Ecological Footprint and Major Driving Forces …
117
at 1 percent significant level affirming the presence of cointegration which attests
to possibility of long-run relationship among the variables. Goodness of fit analysis
is represented with R
2
= 0.972668 and adjusted R
2
= 0.958026 which shows the
extend (95.8%) of dependent variable that is explained by the explanatory variables,
the remaining part (4.2%) is explained by the residuals. Absence of autocorrelation
problem from the model and estimation was confirmed with the Durbin Watson and
LM tests. While the value of Durbin Watson is 1.639145, the value of LM test shows
insignificant in deviance from the null hypothesis of presence of serial correlation.
Also, normal distribution of the error term in the model and stability of the data were
revealed with test of heteroscedasticity and cumulative sum of square (CUSUM and
CUSM
2 ), respectively. The speed of adjustment was confirmed with the error correction model (ECM) at 1% significant level with negative output (−0.780949). This
shows the possibility of establishing equilibrium in the long run after deviation at 8%
speed of adjustment. The short- and long-run outputs can be interpreted and explained
as follow: a negative and significant relationship is found between economic growth
and ecological footprint in the first stage of the economic growth but later a positive and significant relationship is established between squared GDP and ecological
footprint. This trend is repeated both in short and long run. The outcome projects the
initial recovery of environment due to economic growth but the continuous increase
in economic growth certainly paved way for sever damage on the quality of environment. This outcome faults the philosophy of standard EKC which believes that
continuous economy growth will better the environment. Finding did not support
inverted U-shaped of EKC for Pakistan rather N-shaped EKC. This is consistent
with the findings by Ahmed and Long [2]. Numerically, one percent increase GDP
and GDP
2 will decrease and increase environment degradation by −0.005523 and
0.000000331%, respectively. It is worthy of note that value of the GDP
2 is almost
insignificant. This may probably mean that negative effect of economic growth on
environment in the long run is so minute. FDI, energy use, and agriculture have positive and significant relationship with ecological footprint, respectively. This shows
that Pakistan’s environment is impacted negatively by FDI, energy use, and agriculture in the order of 0.021838, 0.008030, and 0.0000000000115%, respectively. The
negative impact of agriculture is negligible as reflected in its coefficient value. With
the recent quest for preservation of Pakistan’s economic growth by the country’s
authority, it is clear from these findings that economic growth is encouraged at the
expense of environment quality. Likewise, the attractiveness of the foreign investors
by the Pakistan’s authority through relaxed regulations and policy tends to favor
only economic growth and pervade the quality expectation of Pakistan’s environment. This is in line with findings by [12, 18, 37, 39] for India and Turkey, and
Copeland [14, 34, 35] which support pollution haven hypothesis.
117
at 1 percent significant level affirming the presence of cointegration which attests
to possibility of long-run relationship among the variables. Goodness of fit analysis
is represented with R
2
= 0.972668 and adjusted R
2
= 0.958026 which shows the
extend (95.8%) of dependent variable that is explained by the explanatory variables,
the remaining part (4.2%) is explained by the residuals. Absence of autocorrelation
problem from the model and estimation was confirmed with the Durbin Watson and
LM tests. While the value of Durbin Watson is 1.639145, the value of LM test shows
insignificant in deviance from the null hypothesis of presence of serial correlation.
Also, normal distribution of the error term in the model and stability of the data were
revealed with test of heteroscedasticity and cumulative sum of square (CUSUM and
CUSM
2 ), respectively. The speed of adjustment was confirmed with the error correction model (ECM) at 1% significant level with negative output (−0.780949). This
shows the possibility of establishing equilibrium in the long run after deviation at 8%
speed of adjustment. The short- and long-run outputs can be interpreted and explained
as follow: a negative and significant relationship is found between economic growth
and ecological footprint in the first stage of the economic growth but later a positive and significant relationship is established between squared GDP and ecological
footprint. This trend is repeated both in short and long run. The outcome projects the
initial recovery of environment due to economic growth but the continuous increase
in economic growth certainly paved way for sever damage on the quality of environment. This outcome faults the philosophy of standard EKC which believes that
continuous economy growth will better the environment. Finding did not support
inverted U-shaped of EKC for Pakistan rather N-shaped EKC. This is consistent
with the findings by Ahmed and Long [2]. Numerically, one percent increase GDP
and GDP
2 will decrease and increase environment degradation by −0.005523 and
0.000000331%, respectively. It is worthy of note that value of the GDP
2 is almost
insignificant. This may probably mean that negative effect of economic growth on
environment in the long run is so minute. FDI, energy use, and agriculture have positive and significant relationship with ecological footprint, respectively. This shows
that Pakistan’s environment is impacted negatively by FDI, energy use, and agriculture in the order of 0.021838, 0.008030, and 0.0000000000115%, respectively. The
negative impact of agriculture is negligible as reflected in its coefficient value. With
the recent quest for preservation of Pakistan’s economic growth by the country’s
authority, it is clear from these findings that economic growth is encouraged at the
expense of environment quality. Likewise, the attractiveness of the foreign investors
by the Pakistan’s authority through relaxed regulations and policy tends to favor
only economic growth and pervade the quality expectation of Pakistan’s environment. This is in line with findings by [12, 18, 37, 39] for India and Turkey, and
Copeland [14, 34, 35] which support pollution haven hypothesis.