The Effect of Money Supply, Exchange Rate and Trade Openness on Carbon Dioxide Emission in Malaysia

Thong, Su Yu (2022) The Effect of Money Supply, Exchange Rate and Trade Openness on Carbon Dioxide Emission in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

Nowadays, climate change is a serious problem. According to scientific findings and observations, global climate change has impacted a variety of ecological systems. The purpose of this study is to investigate the long and short run effects of money supply, exchange rate, and trade openness on carbon dioxide emissions from 1989 to 2018 in Malaysia. Additionally, the study examines granger causality between the dependent and independent variables. To conduct the estimation, the study used the Augmented Dickey-Fuller (ADF), the Johansen-Juselius Test, the Vector Error Correction Model (VECM), and the Granger Causality Test. Money supply has a negative long- and short-run influence, but trade openness has a negative long-run effect. The Granger causality test establishes a causal relationship between carbon dioxide and trade openness, however trade openness does not result in carbon dioxide emission. As a result, the government should propose a policy recommendation aimed at reducing the carbon dioxide emissions in the country.