The Temperature and economic growth nexus in SAARC AND ASEAN countries

Temperature and economic growth nexus in SAARC AND ASEAN countries

  • Syeda Sada Zahra Kashmir Institute of Economics, University of Azad Jammu and Kashmir, Muzaffarabad, Pakistan
  • Samina Sabir 1Kashmir Institute of Economics, University of Azad Jammu and Kashmir, Muzaffarabad, Pakistan
  • Amber Imtiaz Kashmir Institute of Economics, University of Azad Jammu and Kashmir, Muzaffarabad, Pakistan
Keywords: Temperature, economic growth, industrial value-added, agricultural value-added, political stability, Inflation, Government spending, Trade openness, panel data, GMM

Abstract

Global warming is a pressing issue that all countries are facing today. However, it affects the productivity of every sector of the economy and hence economic growth. This study is an attempt to analyze the temperature and economic growth nexus in selected South Asian Association for Regional Cooperation (SAARC) and the Association of Southeast Asian Nations (ASEAN) countries for the time of 1996 to 2018 using Generalized Method of Moments (GMM). This study develops the theoretical framework by extending the Solow growth model by incorporating the temperature in it. The results show that temperature affects economic growth negatively through its detrimental impacts on industrial value-added, agricultural value-added, and political stability in both SAARC and ASEAN regions. However, the study predicts that SAARC countries are more vulnerable regions owing to the rise of warming and temperature than ASEAN countries. Rainfall has a positive and statistically significant effect on the growth of SAARC while this shows positive and insignificant effects in the economy of the ASEAN region. Moreover, industrial value-added and political stability show positive and significant effects on the growth of SAARC and ASEAN but they have a higher impact on the growth of ASEAN countries than SAARC countries' growth. Agricultural value-added has a positive and significant effect on the economic growth of both ASEAN and SAARC countries. Inflation slows down economic growth in ASEAN and SAARC countries. While trade openness, gross fixed capital formation, and government spending spur economic growth in both regions. To sustain the economic growth, policymakers of SAARC and ASEAN countries should take safety measures that can mitigate the emission of greenhouse gases. Moreover, reduction in excessive use of vehicles, reforestation, and environmental technological advancements can reduce the worse effects of rising temperature and protect the environment from degradation.


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Published
2022-04-18
How to Cite
Zahra, S., Sabir, S., & Imtiaz, A. (2022). The Temperature and economic growth nexus in SAARC AND ASEAN countries. Empirical Economic Review, 5(1), 44-72. https://doi.org/10.29145/eer.51.03