Beyond the Environmental Kuznets Curve: The Moderating Role of Governance Quality in the Economic Growth–Deforestation Nexus across ASEAN Economies

Siti Nur Ainiyah (Department of Development Economics, Faculty of Economics and Business, Universitas Pembangunan Nasional "Veteran" Jawa Timur, Surabaya)
Niniek Imaningsih (Department of Development Economics, Faculty of Economics and Business, Universitas Pembangunan Nasional "Veteran" Jawa Timur, Surabaya)

Journal of Regional Economics Indonesia
Vol. 7 No. 2 (2026): Agustus 2026

Deforestation remains a critical environmental challenge in ASEAN amid rapid economic expansion and increasing trade integration. This study investigates the effects of economic growth and trade openness on deforestation and examines whether governance quality moderates these relationships in five ASEAN countries (Indonesia, Malaysia, Thailand, Vietnam, and the Philippines) during 2002–2023. Using panel data analysis, the Fixed Effects Model (FEM) and Moderated Regression Analysis (MRA) are employed to test the Environmental Kuznets Curve (EKC) hypothesis and the moderating role of governance. The results reveal that economic growth and trade openness significantly influence deforestation. The estimated relationship between economic growth and deforestation follows a U-shaped pattern, indicating that the EKC hypothesis is not supported in the ASEAN context. While governance quality has no significant direct effect on deforestation, it significantly moderates the impacts of economic growth and trade openness, functioning as a pure moderator. These findings highlight the pivotal role of governance in shaping environmental outcomes and underscore the importance of strengthening institutional quality to achieve sustainable development in ASEAN.