Climate risks and FDI

Gu, Grace Weishi; Hale, Galina

doi:10.1016/j.jinteco.2023.103731

Cited by 21 publications

(11 citation statements)

References 31 publications

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“…Obtaining a positive but insignificant long-run relationship between FDI and temperature in the case of GCC countries sounds interesting but of low policy implication due to the lack of robustness of that relationship. While the investigation by [ 83 ] found higher temperature levels attracting more FDI in high income countries, a very recent study by [ 84 ] also found a positive but insignificant correlation between FDI and temperature. In fact, the literature on the long-run relationship between these two variables is not extensive enough, however, it is reasonable to argue that a favorable and conducive temperature would attract an inward FDI to countries that are endowed with such favorable conditions.…”

Section: Discussionmentioning

confidence: 97%

Determinants that attract and discourage foreign direct investment in GCC countries: Do macroeconomic and environmental factors matter?

Alharthi,

Islam,

Alamoudi

et al. 2024

PLoS ONE

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In general, foreign direct investments (FDIs) play a crucial role in driving a country’s economic development, promoting diversification, and enhancing competitiveness. The Gulf Cooperation Council (GCC) countries, which heavily rely on the oil and gas sectors, are particularly vulnerable to fluctuations in commodity prices. However, these countries have recognized the imperative of economic diversification and have increasingly turned to inward FDIs to achieve it. By attracting capital, advanced technology, and expertise from foreign investors, FDIs enable the GCC countries to expand their economic base beyond the oil and gas sectors. This diversification not only creates employment opportunities but also fosters resilient economic growth, ultimately leading to an improvement in the living standards of the local population. This study investigates the macroeconomic and environmental factors that potentially attract foreign direct investment (FDI) inflows into the Gulf Cooperation Council (GCC) countries in the long run. Additionally, the study explores the causal relationship between these factors and FDI inflows. The panel autoregressive distributed lag (ARDL) approach to co-integration is the primary analytical technique used, utilizing long time-series data from six GCC countries, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) during the period 1990–2019. The empirical results indicate that, in the long run, almost all independent variables significantly influence FDI in GCC countries. Variables such as GDP growth (GDPG), inflation (INFL), carbon dioxide emissions (CO2), and urbanization (URB) are found to be highly significant (p≤0.01) in their impact on FDI. Moreover, unemployment (UNEMP) also positively and significantly influences FDI in these countries in the long run. Based on the key findings, strategies aimed at reducing persistently high unemployment rates, maintaining population growth, viewing FDI as a driver for GDP growth, and continuing with infrastructure development and urbanization are expected to attract more FDI inflows into GCC countries in the long run. Additionally, fostering both long-term economic incentives and creating a conducive business infrastructure for investors are vital for attracting inward FDI into any nation, including those in the GCC. This research would benefit various stakeholders, including governments, local businesses, investors, academia, and the local society, by providing valuable knowledge and informing decision-making processes related to economic development, diversification, and investment promotion.

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Section: Discussionmentioning

confidence: 97%

Determinants that attract and discourage foreign direct investment in GCC countries: Do macroeconomic and environmental factors matter?

Alharthi,

Islam,

Alamoudi

et al. 2024

PLoS ONE

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“…Consistent with previous literature, and as in this paper, the authors find no systematic evidence of negative impacts of climate policies on aggregate FDI inflows. I expand the work of Gu and Hale (2023) and previous studies assessing the impact of climate policies on FDI along two dimensions. First, in addition to studying the relationship between climate policies and aggregate FDI, I zoom-in into the connection between climate policies and green FDI.…”

Section: Introductionmentioning

confidence: 87%

“…In addition to estimating (1), I also estimate the effect of climate policies on FDI inflows as a share of GDP. At this level of aggregation, estimating this relationship is useful as it allows me to compare results with those of previous studies (e.g., Gu and Hale, 2023).…”

Section: Econometric Approachmentioning

confidence: 99%

“…One common hypothesis in this literature, the so-called pollution-haven hypothesis, argues that more lenient environmental regulation fosters FDI, yet empirical studies have found inconclusive evidence in support of the hypothesis (see Cole, Elliot, and Zhang, 2017 for a summary). A recent contribution to this debate is Gu and Hale (2023). The authors study the impact of natural disasters and climate policies on aggregate FDI.…”

Section: Introductionmentioning

confidence: 99%

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Climate Policies as a Catalyst for Green FDI

Pienknagura

2024

IMF Working Papers

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“…CR not only derives from the direct effects of climate change but is also closely linked to economic and social vulnerability, with uncertainty and unpredictability in its economic consequences. The characteristics of CR determine the significance of its impact on both macroeconomic and financial systems (Baarsch et al., 2020; Caby et al., 2022; Cappelli et al., 2021; Chen, Liu, et al., 2021; Gu & Hale, 2023; Lee et al., 2023; Mallucci, 2022; Nakano, 2021; Zhang, Cheng, et al., 2022). In terms of innovation, climate disasters also significantly hamper technological innovation and the transfer of such technology, by damaging communications and transportation facilities (Chen, Li, et al., 2021).…”

Section: Literature Review and Research Hypothesismentioning

confidence: 99%

Climate risk and renewable energy technological innovation: An institutional environment perspective

2023

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To explore whether climate risk (CR) affects renewable energy technological innovation (RETI) and its boundary conditions, this study examines the relationship between CR and RETI as moderated by institutional environment. Based on panel data of 60 countries for the period 2000–2019, we show that CR is not conducive to RETI, and that its negative marginal impact shows an inverted U‐shaped trend with the improvement of RETI. Heterogeneity analysis shows that floods and storms have the greatest negative impacts on RETI, and that innovations in solar and wind energy technologies are more vulnerable to the adverse shocks of CR. Furthermore, CR has a greater adverse effect on RETI in developing countries than in developed countries. However, the institutional environment, especially the economic institutional environment, can work to mitigate the negative effect of CR on RETI. Our findings not only enrich the research on the economic consequences of CR but also provide effective ways to mitigate the adverse impact of CR on RETI from the perspective of institutional environment.

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Climate risks and FDI

Cited by 21 publications

References 31 publications

Determinants that attract and discourage foreign direct investment in GCC countries: Do macroeconomic and environmental factors matter?

Determinants that attract and discourage foreign direct investment in GCC countries: Do macroeconomic and environmental factors matter?

Climate Policies as a Catalyst for Green FDI

Climate risk and renewable energy technological innovation: An institutional environment perspective

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