Name:

Class: BS Economics 2019-B

CMS:

Time Series Assignment: 02

Does agricultural value-added induce environmental degradation? Evidence
from China
Graphs

All the variables have some trend & intercept.

 1. Unit Root Test
The study uses data for carbon emissions, GDP, Energy use, Agricultural value added and
GDP squared for China using time series data from 1992-2014. All these variables are
converted into natural log form to make the data more comparable.

1. Agricultural value added (lnAGR)

Hence, we reject null hypothesis at the 2nd difference, as t-adf<t-critical. Plus P-value is less
than 0.05.

lnAgr is stationary at the 2nd difference.

 2. CO2 emissions(ln CO2)

Hence, we reject null hypothesis at the 2nd difference, as t-adf<t-critical. Plus P-value is less
than 0.05.

lnCO2 is stationary at the 2nd difference.

 3. GDP of China (lnGDP)

Hence, we reject null hypothesis at the 2nd difference, as t-adf<t-critical. Plus P-value is less
than 0.05.

lnGdp is stationary at the 2nd difference.

 4. GDP Square (lnGDP)^2

Hence, we reject null hypothesis at the 2nd difference, as t-adf<t-critical. Plus P-value is less
than 0.05.

lnGdp2 is stationary at the 2nd difference.

5. Energy Consumption (ln Energy)

Hence, we reject null hypothesis at the 2nd difference, as t-adf<t-critical at 10% level of
significance. Plus P-value is less than 0.10.

lnEng is stationary at the 2nd difference.

 2. ARDL Cointegration

First, we applied the ARDL cointegration test taking 2 lags for dependent and 1 lag for
independent variables as chosen by the Eviews. Then, after performing the test, we performed
the ARDL f-bound test which helps us in determining the long run results. We can see from
the results that f-stat value of 7.32 is greater than upper bound value at 5%. Hence, we reject
the null hypothesis. Null hypothesis in this case was that ‘There is no cointegration’.
Therefore, we can say that cointegration exists among the variables and they have a long run
relationship.
Short Run Results
We get the short run results using ARDL cointegration using Error Correction form. The
results are as follows:

Here, we see the results by the coefficient values in the short run for each variable at different
levels. The CointEq(-1) value is -1.43. The negative sign indicates that in the long run, the
model will adjust monotonically towards equilibrium. The value of 0.143 in cointEq indicates
the magnitude of the speed of adjustment.
3. Granger Causality
Results: