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Exploring the environmental Phillips Curve: How do globalization, economic growth, and institutional quality shape
Mohammad Mafizur Rahman1, Seyit Ali Mi̇çooğulları2, Süleyman Deği̇rmen3
1University of Southern Queensland, School of Business, Toowoomba, Australia.
Abstract:
This study examines the Environmental Phillips Curve (EPC) hypothesis by analyzing the relationship between the unemployment rate (UR) and Load Capacity Factor (LCF) in the 10 most globalized European countries from 1996 to 2022. Using modern econometric methods, including the STIRPAT model and CS-ARDL, the study assesses the effects of economic growth (GDP), energy consumption (PEC), institutional quality (INQ), and globalization (KOF) on environmental sustainability. The findings robustly support the EPC hypothesis, showing that higher unemployment rates positively impact LCF, enhancing environmental quality. This effect is most evident in highly globalized nations like Germany, Sweden, and Switzerland, where decreased economic activity lowers environmental pressures. The results also reveal that economic growth negatively impacts LCF long-term, emphasizing sustainable development needs. While energy consumption degrades the environment, institutional quality and globalization contribute positively to sustainability. A unique aspect of this study is the interaction term UR∗INQ, demonstrating that institutional quality moderates the UR-LCF relationship, further validating the EPC hypothesis. These insights underscore the importance of integrated strategies for economic and environmental goals in globalized European countries.
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