Environmental Kuznets Curve for Deforestation in Indonesia: An ARDL Bounds Testing Approach

The main objective of this study is to empirically demonstrate the inverse U-shaped relationship, which is generally called the environmental Kuznets curve (EKC), between economic development and deforestation rate in Indonesia. For this purpose, we analyzed time-series data for Indonesia over 46 years from 1962 to 2007 with the autoregressive distributed lag (ARDL) bounds testing approach to cointegration. Results support the long-run inverted-U relationship, which implies that, while the deforestation rate increases at the initial stage of economic growth, it declines after a threshold point. The income turning point of the EKC was calculated to be US$ 990.4. These findings derived solely from the time-series data for Indonesia provide helpful information for the Indonesian government and policy-makers in the sense that it explicitly indicates the specific tendency for that country.