Abstract: The link between trade openness and environmental quality has become one of the most debated topics in recent years. Yet, limited empirical investigations have been carried out in this area. This paper examines the relationship between trade openness and carbon emissions in the case of Sri Lanka. The Autoregressive Distributed Lag (ARDL) bounds testing approach and the Johansen-Juselius maximum likelihood approach are employed to detect cointegration relationships over the period 1960 to 2006. The results suggest neither a long run equilibrium relationship nor a long term causality exists between trade openness and carbon emissions for Sri Lanka. However, there exists a short run relationship between trade openness and carbon emissions.
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