Causal interactions between CO2 emissions, FDI, and economic growth: Evidence from dynamic simultaneous-equation models

Abstract

In this article, we investigate the causality links between CO2 emissions, foreign direct investment, and economic growth using dynamic simultaneous-equation panel data models for a global panel of 54 countries over the period 1990-2011. We also implement these empirical models for 3 regional sub-panels: Europe and Central Asia, Latin America and the Caribbean, and the Middle East, North Africa, and sub-Saharan Africa. Our results provide evidence of bidirectional causality between FDI inflows and economic growth for all the panels and between FDI and CO2 for all the panels, except Europe and North Asia. They also indicate the existence of unidirectional causality running from CO2 emissions to economic growth, with the exception of the Middle East, North Africa, and sub-Sahara panel, for which bidirectional causality between these variables cannot be rejected. These empirical insights are of particular interest to policymakers as they help build sound economic policies to sustain economic development.

Environmental degradation in France: The effects of FDI, financial development, and energy innovations

“…In a sectoral level (fishing and agriculture) analysis on OECD countries, Pazienza (2015) indicates that FDI has a negative effect on CO2 emissions. On contrary, in a comprehensive analysis which involved data on 54 countries, 5 Omri et al (2014) highlight the existence of a feedback effect between FDI and CO2 emissions, except in Europe and North Asia. Their findings strongly imply that one shall consider the regional-level and country-level heterogeneities, while analysing the nexus between FDI and emissions.…”

Foreign Direct Investments and CO2 Emissions Relationship: The Case of Turkey

“…Most of the studies in the literature [Shahbaz et al (2015), Kivyiro and Arminen (2014), Omri, Nguyen and Rault (2014), Blanco, Gonzalez and Ruiz (2011) (Tang and Tan (2015), Asghari (2013), Öztürk and Öz (2016), Atay Polat (2015), Şahinöz and Fotourehchi (2014)] show that FDI reduce CO2 emissions. Some of the studies [Keho (2016), Kim and Adilov (2012), Zeren (2015)] have found both positive and negative results depending on the countries included in the analysis.…”

The effects of electricity consumption, economic growth, financial development and foreign direct investment on CO2 emissions in Kuwait

“…Although numerous time series and panel studies have examined such associations (e.g., Omri et al, 2014;Ozcan, 2013;Ozturk & Acaravci, 2011), to the best of the authors' knowledge, no study has yet been undertaken to determine such causal relationships in the context of Kuwait, which is potentially a very important country for such investigation. The current study is an attempt to fill this gap.…”