Poverty alleviation, improved environmental managements, and achievement of accelerated economic growth are critical goals of all the South Asian nations and other developing economies of the World. Therefore, for reducing poverty and environmental degradation for the achievement of accelerated economic growth, it is imperative to explore the relationship among these complex issues. This study is an attempt to explore the relationship between poverty, environment, and economic growth in South Asian lower middle income countries (i.e. Pakistan, India, Sri Lanka, and Bangladesh) with the help of annual time series data covering the time span 1976 to 2014. The study has applied the Augmented Dickey Fuller (ADF) Unit-Root Test, Asymptotic t-test, Approximate F-Test, Wald Test, Lagrange Multiplier Test and System Residual Normality Tests to fulfill the preconditions of the time series analysis and to specify Simultaneous Equation System. To overcome the flaws related with the methodologies adopted by the earlier studies, this study applies the Three-Stage Least Square (3SLS) system estimation methodology to explore the relationship between poverty, environment and economic growth in the South Asian economies. To capture the association between poverty, environment, and economic growth in South Asia, panal data analysis is conducted. Findings of panel data analysis indicate that impact of environmental degradation on economic growth is negative and impact of economic growth on environmental degradation is positive, poverty and economic growth are inversely related with each other, poverty and environmental degradation positively affect each other. In control variables, capital formation has positive impacts on economic growth, energy consumption and urbanization are positively affecting environmental degradation, and population growth and inflation positively affect the poverty. To investigate the relationship between poverty, environment and economic growth in Pakistan, India, Sri Lanka, and Bangladesh, the study has also conducted the time series analysis. Results of time series analysis demonstrate that impacts of environmental degradation on economic growth are negative, relationships between poverty and economic growth are found negative, relationship between poverty and environment is positive across the South Asian countries. The impact of economic growth on environmental degradation is positive in Pakistan, India and Bangladesh with the exception of Sri Lanka where economic growth has negative impact on environmental degradation which indicates that Sri Lanka has crossed the stage of Environmental Kuznet Curve beyond which growth relieves the environmental degradation, whereas, Pakistan, India, and Bangladesh are lagging behind that stage. The study concludes that South Asian countries do not follow the identical trends and patterns of poverty, environment and economic growth. So, it is not possible to suggest identical policy implications for all the countries. Majority of the results of system equations are found to be theoretically supportive across South Asian countries. Nevertheless, the findings of the study imply that the relationships among poverty, environment and economic growth are critical challenges for policy makers, researchers and the leaders as well, so that bad impacts of poverty and environmental degradation could be controlled in order to accelerate economic growth. Therefore, by recognizing the links between poverty, environment and economic growth, it is suggested that South Asian leaders, researchers and policy makers should devise an integrated economic development strategies that provide a prominent role to poverty alleviation and reducing environmental degradation. The achievement of accelerated economic growth may become the ultimate source to provide a window of opportunities for eradicating poverty and reducing environmental dreadful conditions and lead to a virtuous circle.
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