Generalized Method of Moment Application in Simultaneous Dynamic Panel Data Equations for Economic Growth, CO₂ Emissions, and Health Expenditures Modelling

Sustainable development is one of the goals of ASEAN as a UN cooperation partner. The high level of CO₂ emissions as one indicator of the decline in environmental quality in several ASEAN member countries, requiring an appropriate policy in order to achieve sustainable development targets. Based on previous research, the relationship between CO₂ emissions, income, and health expenditure is not only simultaneous but also dynamic (changes in a variable spread to the current period and future periods). The relationship between these variables can be described in a system of dynamic simultaneous equations. The ten ASEAN country panel data for eight years (2008-2015) will be used by applying a simultaneous dynamic data panel model. GMM-System Estimator and GMM Arellano-Bond are used to estimate the parameters of dynamic models. Based on the accuracy of the sign with economic theory as well as from the standard error estimator produced, estimates from the GMM-System Estimator are considered better. The resulting estimates indicate a significant simultaneous influence between health expenditure and per capita income and between health expenditure and CO₂ emissions. Per capita income growth affects the growth of CO₂ emissions indirectly through per capita health expenditure. In addition, the lag of each variable, namely per capita income, per capita health expenditure, and CO₂ emission has a positive and significant effect that indicates a long-run multiplier effect.