Does the Environmental Kuznets Curve for CO2 Emissions Exist for Rwanda? Evidence from Bootstrapped Rolling-Window Granger Causality Test

This paper examined the causal relationship between economic growth and carbon dioxide emissions (CO2) in Rwanda using annual data from 1960-2014. The study was conducted within the framework of the environmental Kuznets curve (EKC) hypothesis using the rolling-window bootstrap Granger causality test approach with a rolling-window size of 15 years. The methodology allows for non-constancy in the parameters of the vector autoregression (VAR) model in the short run as well as in the long run. The study found bi-direction causality between the real gross domestic product (GDP) and CO2 emissions in metric tons per capita. The results from the rolling-window bootstrap Granger causality test show that GDP negatively influenced CO2 emissions in the 1976-1977, 1990-1993, 2005-2006, and 2007-2013 sub-sample periods. This result depicts a monotonically decreasing EKC, contrary to the standard EKC relationship. The downward-sloping EKC was explained by the transition of the Rwandan economy from an industrial-based economy to a service-based economy. Further, a feedback effect from CO2 emissions to the economy was established.