Dynamic common correlated effects of pandemic uncertainty on environmental quality: fresh insights from East-Asia and Pacific countries

ABSTRACT

It is well known that pandemic-related uncertainty affects various macroeconomic indicators, including environmental quality. Due to pandemic outbreaks, the reduction in economic activities affects the environmental quality in many economies. The study explores the impact of pandemic uncertainty on environmental quality in East-Asia and Pacific countries. Most past research use only CO2 emissions, which is an inappropriate measurement of environmental quality. Besides CO2 emissions, we have utilized other pollutants like N2O and CH4 emissions along with ecological footprint. The traditional econometric approaches ignore cross-sectional dependence and heterogeneity and give biased outcomes. Hence, we have employed a new method, “Dynamic Common Correlated Effects (DCCE),” which can excellently deal with the problems mentioned above. The short-run and long-run DCCE estimations show a negative and significant influence of pandemic uncertainty on ecological footprint, CO2 and CH4 emissions in whole and lower-income group of East-Asia and Pacific region. Moreover, pandemic uncertainty has a negative relationship with all indicators of environmental quality in higher-income economies. The study provides a unique opportunity to examine how pandemic uncertainty through anthropogenic activities affects environmental quality and serves as a significant resource for policymakers in planning and estimating the effectiveness of environmental quality measures. It is necessary to carry out sustainable environmental policies in East-Asia and Pacific region according to the vulnerabilities and resilience to global pandemic uncertainty.