Main Article Content
Abstract
Purpose ― This research aims to empirically investigate and compare the effects of foreign direct investment on climate change in five South Asian nations.
Methodology ― This research uses yearly data covering 1980–2020 in five South Asian nations: Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Vector Autoregressive (VAR) methods with variance decomposition and impulse response function provide the basis of the empirical data for comparison analysis.
Findings ― This research shows that foreign direct investment's impact on pollution ranges from 1% to 10% in four countries and 16.13% in Pakistan. This indicates that in five South Asian states, there is little endogenous correlation between foreign direct investment and pollution. Furthermore, a shock to foreign investment improves the environmental conditions in Bangladesh and India while harming the growth of other nations.
Implications ― The impact of foreign direct investment on pollution may vary based on each country's economic situation. Public efforts to enhance capital goods, education, health, and infrastructure are essential for reducing pollution and attracting foreign investment. Therefore, improved transparency and governance are essential for a positive relationship between growth and foreign investment.
Value/Originality ― This research contributes to analyzing and comparing the effects of foreign direct investment on climate change in five South Asian nations using Vector Autoregressive (VAR) methods.
Keywords
Article Details
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References
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References
Acheampong, A. (2019). Modelling for insight: Does financial development improve environmental quality? Energy Economics, 83(C), 156–179. https://EconPapers.repec.org/RePEc:eee:eneeco:v:83:y:2019:i:c:p:156-179
Afza, T., & Khan, M. M. S. (2009). Greenfield in Pakistan: Is it really green? An empirical investigation. American Journal of Scientific Research, 4(1), 59-71.
Ahmed, K., & Long, W. (2012). Environmental Kuznets Curve and Pakistan: An Empirical Analysis. Procedia Economics and Finance, 1, 4–13. https://doi.org/https://doi.org/10.1016/S2212-5671(12)00003-2
Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2020). Does foreign direct investment promote growth? Exploring the role of financial markets on linkages. Journal of Development Economics, 91(2), 242–256. https://EconPapers.repec.org/RePEc:eee:deveco:v:91:y:2010:i:2:p:242-256
Behera, S., & Dash, D. (2017). The effect of urbanization, energy consumption, and foreign direct investment on the carbon dioxide emission in the SSEA (South and Southeast Asian) region. Renewable and Sustainable Energy Reviews, 70, 96–106. https://doi.org/10.1016/j.rser.2016.11.201
Bernanke, B. S. (1986). Alternative explanations of the money-income correlation. Carnegie-Rochester Conference Series on Public Policy, 25, 49–99. https://doi.org/https://doi.org/10.1016/0167-2231(86)90037-0
Bokpin, G. A. (2017). Foreign direct investment and environmental sustainability in Africa: The role of institutions and governance. Research in International Business and Finance, 39(PA), 239–247. https://EconPapers.repec.org/RePEc:eee:riibaf:v:39:y:2017:i:pa:p:239-247
De Gregorio, J., Lee, J.-W., & Borensztein, E. (1998). How Does Foreign Investment Affect Growth? Journal of International Economics, 45, 115–135. https://doi.org/10.1016/S0022-1996(97)00033-0
Demena, B. A., & Afesorgbor, S. (2020). The effect of FDI on environmental emissions: Evidence from a meta-analysis. Energy Policy, 138(C), S0301421519307773. https://EconPapers.repec.org/RePEc:eee:enepol:v:138:y:2020:i:c:s0301421519307773
Frutos-Bencze, D., Bukkavesa, K., & Kulvanich, N. (2017). Impact of FDI and trade on environmental quality in the CAFTA-DR region. Applied Economics Letters, 1–6. https://doi.org/10.1080/13504851.2017.1282112
Hakro, A. N., & Ghumro, I. (2011). Determinants of foreign direct investment flows to Pakistan. Journal of Developing Areas, 44(2), 217–242. https://EconPapers.repec.org/RePEc:jda:journl:vol.44:year:2011:issue2:pp:217-242
Halliru, A., Loganathan, N., Golam Hassan, A. A., Mardani, A., & Kamyab, H. (2020). Re-examining the environmental Kuznets curve hypothesis in the Economic Community of West African States: A panel quantile regression approach. Journal of Cleaner Production, In Press. https://doi.org/10.1016/j.jclepro.2020.124247
Hines, J., & Rice, E. M. (1994). Fiscal Paradise: Foreign Tax Havens and American Business. The Quarterly Journal of Economics, 109(1), 149–182. https://EconPapers.repec.org/RePEc:oup:qjecon:v:109:y:1994:i:1:p:149-182.
Ho, M., Stiroh, K., Jorgenson, D., & Samuels, J. (2007a). The Industry Origins of the American Productivity Resurgence. Economic Systems Research, 19, 229–252. https://doi.org/10.4036/iis.2008.43
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2), 231–254. https://doi.org/https://doi.org/10.1016/0165-1889(88)90041-3
Jorgenson, A., Dick, C., & Mahutga, M. (2007). Foreign Investment Dependence and the Environment: An Ecostructural Approach. Social Problems, 54, 371–394. https://doi.org/10.1525/sp.2007.54.3.371
Khan, A. H., & Kim, Y.-H. (1999). Foreign Direct Investment In Pakistan: Policy Issues And Operational Implications. https://www.adb.org/sites/default/files/publication/28178/er066.pdf
Khan, M., & Samad, G. (2010). Intellectual Property Rights and Foreign Direct Investment: Analysis of 14 South and South East Asian Countries, 1970-2005. Applied Econometrics and International Development, 10(1). https://EconPapers.repec.org/RePEc:eaa:aeinde:v:10:y:2010:i:1_16
Kim, M., & Adilov, N. (2011). The Lesser of Two Evils: An Empirical Investigation of FDI-Pollution Tradeoff. Economics Faculty Presentations.
Lai, K. Y., Sarkar, C., Ni, M. Y., Gallacher, J., & Webster, C. (2020). Exposure to light at night (LAN) and risk of obesity: A systematic review and meta-analysis of observational studies. Environmental Research, 187, 109637. https://doi.org/https://doi.org/10.1016/j.envres.2020.109637
Levinson, A., & Taylor, M. S. (2008). Unmasking the Pollution Haven Effect. International Economic Review, 49(1), 223–254. https://EconPapers.repec.org/RePEc:ier:iecrev:v:49:y:2008:i:1:p:223-254
Mckinnon, A. (2010). Environmental sustainability. Green logistics: improving the environmental sustainability of logistics. London.
Mukherjee, S. (2010). Is There Any Relationship between Environment, Human Development, Political and Governance Regimes? Evidences from a Cross-Country Analysis. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1536352
Ndikumana, L., & Verick, S. (2008). The linkages between FDI and domestic investment: Unravelling the developmental impact of foreign investment in Sub‐Saharan Africa. Development Policy Review, 26(6), 713-726. https://doi.org/10.1111/j.1467-7679.2008.00430.x
Ntow-Gyamfi, M., Bokpin, G., Aboagye, A., & Ackah, C. (2020). Environmental sustainability and financial development in Africa; does institutional quality play any role? Development Studies Research, 7, 93–118. https://doi.org/10.1080/21665095.2020.1798261
Omri, A., & Kahouli, B. (2014). Causal relationships between energy consumption, foreign direct investment and economic growth: Fresh evidence from dynamic simultaneous-equations models. Energy Policy, 67(C), 913–922. https://EconPapers.repec.org/RePEc:eee:enepol:v:67:y:2014:i:c:p:913-922
Sbia, R., & Shahbaz, M. (2017). Economic growth, financial development, urbanisation and electricity consumption nexus in UAE. Economic Research-Ekonomska Istraživanja, 30, 1–23. https://doi.org/10.1080/1331677X.2017.1305792
Shahbaz, M., Hye, Q. M. A., Tiwari, A. K., & Leitão, N. C. (2013). Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renewable and Sustainable Energy Reviews, 25, 109–121. https://doi.org/10.1016/j.rser.2013.04.009
Hossain, M. S., (2011). Panel estimation for CO2 emissions, energy consumption, economic growth, trade openness and urbanization of newly industrialized countries. Energy Policy, 39(11), 6991–6999. https://doi.org/10.1016/j.enpol.2011.07.042
Sims, C. A. (1992). Interpreting the macroeconomic time series facts: The effects of monetary policy. European Economic Review, 36(5), 975–1000. https://doi.org/https://doi.org/10.1016/0014-2921(92)90041-T
Singhania, M., & Saini, N. (2021). Demystifying pollution haven hypothesis: Role of FDI. Journal of Business Research, 123(C), 516–528. https://EconPapers.repec.org/RePEc:eee:jbrese:v:123:y:2021:i:c:p:516-528
Yang, M., Cooc, N., & Sheng, L. (2017). An Investigation of Cross-linguistic Transfer between Chinese and English: A Meta-analysis. Asian-Pacific Journal of Second and Foreign Language Education, 2. https://doi.org/10.1186/s40862-017-0036-9
Zheng, J., & Sheng, P. (2017). The Impact of Foreign Direct Investment (FDI) on the Environment: Market Perspectives and Evidence from China. Economies, 5(1). https://doi.org/10.3390/economies5010008
Zhu, J., Bailly, A., Zwiewka, M., Sovero, V., Di Donato, M., Ge, P., ... & Geisler, M. (2016). TWISTED DWARF1 mediates the action of auxin transport inhibitors on actin cytoskeleton dynamics. The Plant Cell, 28(4), 930-948. https://doi.org/10.1105/tpc.15.00726