Economic growth impact of climate change: New empirical evidence from Vietnam

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Type of the article: Research Article

Abstract
This study aims to investigate the economic effect of climate change by providing rigorous evidence of its impact in the most climate-susceptible economies, with Vietnam as a representative case. The study scrutinizes the economic growth impact of climate change while examining the intervening roles of renewable energy usage, trade openness, and the interaction between renewable energy usage and financial development in both the short and long run. Applying the ARDL framework using Vietnam’s data from 1992 to 2022, the results provide evidence that climate change exerts a direct influence on growth across both time horizons. Specifically, a one-degree Celsius increase in temperature is associated with an approximate 0.18% increase in GDP in the long run, and 0.018% in the short run. The findings suggest that greater reliance on renewable energy contributes positively to economic performance, as a 1% increase in the renewable energy share within the energy mix corresponds to a 1.1% expansion in GDP. In contrast, increased trade openness is found to adversely affect long-run growth, with a 1% rise in openness linked to a GDP contraction of about 0.004%. Furthermore, the joint effect of renewable energy utilization and financial development does not display a statistically significant influence on long-run growth. Conversely, short-run dynamics indicate that changes in this interaction support growth, while adjustments in renewable energy consumption and trade openness tend to dampen growth performance. The study recommends policies that enhance climate resilience, promote renewable energy, and support trade strategies to strengthen production value chains for sustainable growth.

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    • Figure 1. AIC levels
    • Figure 2. The plot of the cumulative sum of recursive residuals (a) and the plot of the cumulative sum of squares of recursive residuals (b)
    • Table 1. Data and variables
    • Table 2. Descriptive statistics
    • Table 3. Unit root test
    • Table 4. ARDL bound test results
    • Table 5. Long-run model estimates
    • Table 6. Short-run model estimates
    • Table 7. Results of diagnostic tests
    • Table 8. Granger causality test
    • Conceptualization
      Vu Phuong Anh Do, Thi Cam Van Nguyen, Hoi Quoc Le
    • Formal Analysis
      Vu Phuong Anh Do, Thi Cam Van Nguyen
    • Funding acquisition
      Vu Phuong Anh Do
    • Methodology
      Vu Phuong Anh Do, Thi Cam Van Nguyen, Hoi Quoc Le
    • Software
      Vu Phuong Anh Do, Thi Cam Van Nguyen
    • Data curation
      Thi Cam Van Nguyen
    • Writing – original draft
      Thi Cam Van Nguyen
    • Writing – review & editing
      Thi Cam Van Nguyen, Hoi Quoc Le
    • Investigation
      Hoi Quoc Le
    • Resources
      Hoi Quoc Le
    • Supervision
      Hoi Quoc Le
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Environmental Economics
Environmental Economics