Development-Environment-Trade Nexus in BRICS: A Panel VAR Estimation

Abstract

Aims: This research examines the intricate associations among economic development, environmental degradation, and trade openness within the BRICS countries, providing visions for sustainable development policies aligned with global climate goals. Study Design: The study adopts a comprehensive panel data approach, analyzing 53 annual observations per country, totaling 265 observations from 1970 to 2023, to explore the interdependencies of key variables across Brazil, Russia, India, China, and South Africa. Place and Duration of Study: The research emphases on the BRICS countries, with data spanning from 1970 to 2023, utilizing 53 years of annual observations per country, aggregated to 265 data points. Methodology: The study employs advanced econometric methods, including panel unit root tests to assess stationarity, cointegration analysis to evaluate long-run relationships, panel vector autoregression to model dynamic interactions, and Granger causality tests to identify directional influences among variables such as GDP per capita, CO2 emissions, trade openness, and energy consumption. Results: Findings reveal strong positive correlations among all variables with no evidence of long-run cointegration, and significant causal pathways: variations in per capita GDP Granger cause variations in CO2 emissions, CO2 emissions Granger cause variations in trade openness, and variations in trade openness Granger cause variations in GDP per capita, highlighting complex interplays in these emerging economies. Conclusion: The results underscore the profound interdependencies between economic development, environmental impact, and trade dynamics in BRICS countries, offering critical insights for policymakers to design sustainable strategies that equilibrize economic development with environmental sustainability and global climate objectives.