[Cointegration test and variance decomposition for the relationship between economy and environment based on material flow analysis in Tangshan City Hebei China]

Abstract

The material flow account of Tangshan City was established by material flow analysis (MFA) method to analyze the periodical characteristics of material input and output in the operation of economy-environment system, and the impact of material input and output intensities on economic development. Using econometric model, the long-term interaction mechanism and relationship among the indexes of gross domestic product (GDP) , direct material input (DMI), domestic processed output (DPO) were investigated after unit root hypothesis test, Johansen cointegration test, vector error correction model, impulse response function and variance decomposition. The results showed that during 1992-2011, DMI and DPO both increased, and the growth rate of DMI was higher than that of DPO. The input intensity of DMI increased, while the intensity of DPO fell in volatility. Long-term stable cointegration relationship existed between GDP, DMI and DPO. Their interaction relationship showed a trend from fluctuation to gradual ste adiness. DMI and DPO had strong, positive impacts on economic development in short-term, but the economy-environment system gradually weakened these effects by short-term dynamically adjusting indicators inside and outside of the system. Ultimately, the system showed a long-term equilibrium relationship. The effect of economic scale on economy was gradually increasing. After decomposing the contribution of each index to GDP, it was found that DMI's contribution grew, GDP's contribution declined, DPO's contribution changed little. On the whole, the economic development of Tangshan City has followed the traditional production path of resource-based city, mostly depending on the material input which caused high energy consumption and serous environmental pollution.