Structural break and Fourier Cointegration Analysis test of the validity of the Environmental Kuznets Curve hypothesis in Turkey

In time series analysis, different approaches are used to determine the stationarity of the series and the cointegration relationship. In this context, not including the effect of structural break in the analysis process may lead to misleading results in the determination of the unit root and cointegration relationship. In order to catch these changes, in addition to unit root and cointegration tests that take structural break into account, tests in which unknown forms of structural breaks are modeled through Fourier functions have been used in recent years. In this study, the validity of the Environmental Kuznets Curve hypothesis, which states that there is an inverted U-shaped relationship between economic growth and environmental degradation, is investigated. For this purpose, structural break unit root tests and Fourier unit root tests were applied to the series and the stationarity of the variables was examined. The existence of a long-term relationship between the variables that were found to be stationary in the first difference was investigated.For this, cointegration tests with structural breaks and Banerjee et al. (2017) cointegration test, in which the unknown number and form of breaks are modeled through fourier functions, were applied. It has been determined that there is a cointegration relationship between the variables and Dynamic Least Squares (DOLS) and Fully Modified Least Squares FMOLS methods are used to determine the long-term coefficients. The long-term coefficients obtained show that the relationship between income and environmental degradation is in an inverted u form and supports the validity of the EKC hypothesis in Turkey. According to the results of the analysis, it is understood that the amount of energy consumption per capita and the increase in urban population increase carbon emissions.