THE IMPACT OF CLIMATE CHANGE ON ECONOMIC GROWTH IN DEVELOPING COUNTRIES: A PANEL ARDL ANALYSIS (2000-2022)

Abstract

This study investigates the impact of climate change on economic growth in Developing Countries using panel data covering the period from 2000 to 2022. The study applies the Panel Autoregressive Distributed Lag (Panel ARDL) model with the Pooled Mean Group (PMG) estimator to examine both the short-run and long-run relationships between economic growth and selected climate-related variables, including carbon dioxide (CO₂) emissions, energy imports, and population growth. To ensure the appropriateness of the estimation technique, cross-sectional dependence and panel unit root tests were conducted prior to analysis. The findings indicate that CO₂ emissions and energy imports have positive and statistically significant effects on economic growth in the short run, suggesting that activities associated with high energy consumption and emissions contribute to temporary economic expansion in developing economies. Conversely, the long-run results show that CO₂ emissions, energy imports, and population growth exert statistically insignificant effects on economic growth, implying that these factors do not support sustainable long-term development. Furthermore, the error correction term is negative and statistically significant, indicating a rapid convergence toward long-run equilibrium after short-run disturbances. The study concludes that although climate-related factors may enhance economic performance in the short term, they are insufficient for sustaining long-term growth. Consequently, the study recommends that Developing countries adopt cleaner energy alternatives, strengthen climate adaptation policies, and promote productivity-driven investments in order to achieve sustainable economic development.