Evaluation of kernel Causality between Groundwater Extraction and Economic Growth: Application of Nadaraya-Watson kernel Regression Model

Water is as the primary input in the production function of agriculture, industry, and mining, as an intermediate commodity in tourism, services, and commerce, as a commodity in the consumer basket of households and as the most important factor in the environmental sector. it is also perhaps the most important commodity- Social and environmental factors. Considering the increasing demand and the decrease in water supply, which leads to the scarcity of water, especially groundwater, the impact of this variable on economic growth and its reciprocal relationship is highly regarded by economists. The purpose of this study was to evaluate the kernel causality between extraction of groundwater resources and economic growth using the Nadaraya-Watson regression model and the generalized correlation coefficient for Iran's economy from 1982 to 2015. The results of the research show that although Granger's causality indicates that there is no relation between water consumption and GDP, the generalized correlation coefficient and nonparametric regression show the existence of unidirectional kernel causality from consumption of water to GDP. Therefore, the drop in groundwater levels and the depletion of groundwater aquifers can greatly affect economic growth.