Exploring the Causal Relationship between Effective Factors Environmental Pollution in Iran during 1977 to 2015

The aim of this paper is to examine the causal relationship between carbon dioxide emissions per capita, energy consumption per capita, gross domestic production per capita, trade openness, financial development and urban population in Iran for the 1977-2015 periods. Hence, the bounds F-test of co-integration was used to explore the relationship between above variables. The results show that elasticity of carbon dioxide emissions per capita relative to gross domestic production per capita, trade openness, energy consumption per capita and urban population is positive and to the financial development index is negative. In addition, this paper explores the causal relationship between the study variables using the error-correction model based on Granger’s causality tests. The causality test results showed that there is two-way causality between financial development and gross domestic production per capita while there is one-way causality between carbon dioxide emissions per capita and trade openness, energy consumption per capita and urban population.