The hidden costs of inflation: A critical analysis of industrial development and environmental consequences

by Dan Zheng, Abdullah Addas, Liaqat Ali Waseem, Syed Ali Asad Naqvi, Muneeb Ahmad, Kashif Sharif

The study draws attention to the associations between monetary and economic elements and their potential environmental impacts. The study uses time series data from 1960 to 2022 to examine the connection between CO₂ emissions, industrial growth, GNE, and inflation in China. The researchers utilized the well-known econometric technique of nonlinear autoregressive distributed lag (NARDL) to examine nonlinear correlations between these variables. The results reveal that GDP, inflation, and economic development influence long-term CO₂ emissions. The strong positive correlation between gross national expenditures and economic activity increases CO₂ emissions. In the short run, CO₂ emissions are positively and statistically significantly affected by inflation. While inflation temporarily affects CO₂ emissions, this effect dissipates with time. Industrial activity increases CO₂ emissions, and China’s fast industrialization has damaged the environment. The energy-intensive fertiliser manufacturing process and fossil fuels increase CO₂ emissions. The research shows how government officials and academics may collaborate to create tailored measures to alleviate the environmental impacts of economic activity.