Dynamic Causal Relationships among CO2 Emissions, Energy Consumption, Economic Growth and FDI in the most Populous Asian Countries

This paper investigates the dynamic causal relationships among environmental degradation, economic growth, foreign direct investment (FDI) and energy consumption in the 12 most populous countries in Asia. This panel sample shows evidence that supports the Environmental Kuznets Curve (EKC), and that CO2 emissions begin to decline when income level reaches to 8.9341 (in logarithms). Applying Granger causality test, we find the existence of both short and long-run causality relationships among these variables, and economic growth, FDI, energy consumption and CO2 emissions of 12 Asian most populous countries have relationships with Japanese income. On the other hand, our estimated results suggest that these countries have been exchanging the environmental degradation to implement economic activities. Furthermore, these results support the pollution haven hypothesis,which indicate the less stringent environmental regulations of the host countries have attracted FDI inflows. However, FDI inflows are found significantly that does not intensify the environment degradation within these 12 Asian countries as a panel sample.