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Energy Savings via Foreign Direct Investment? - Empirical evidence from Portugal

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  • João Paulo Bento

    (Research Unit in Governance, Competitiveness and Public Policy and Department of Economics Management and Industrial Engineering, University of Aveiro, 3810-193 Aveiro, Portugal)

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    Abstract

    This study runs a cointegration analysis on annual data from 1980 to 2007 to investigate the relationship between primary energy consumption, economic growth and net inflows of foreign direct investment with the Engle and Granger method, Stock-Watson dynamic ordinary least squares (DOLS), the bounds testing approach to cointegration and error correction modelling. The empirical results suggest that there is a stable long run linear cointegration relationship between these three variables. While income has a large and positive influence on energy consumption, the results point to a small but negative effect of foreign direct investment (FDI) on energy consumption. As for the short-run relationship among the series, the estimation and inference in the autoregressive distributed lag error correction model (ARDL) further confirm this link. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign investment can induce energy conservation without obstructing economic growth.

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    File URL: http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2011-24.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper provided by Maastricht School of Management in its series Working Papers with number 2011/24.

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    Length: 16 pages
    Date of creation: Nov 2011
    Date of revision:
    Handle: RePEc:msm:wpaper:2011/24

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    Keywords: energy consumption; economic growth; foreign direct investment; cointegration;

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    Cited by:
    1. Sethi, Amarjit Singh & Kaur, Supreet, 2013. "Physical Capital Formation And Income Relationships: A Temporal Analysis For Punjab And Haryana," Journal of Regional Development and Planning, JRDP, vol. 2(2), pages 109-130.
    2. Omri, Anis & Kahouli, Bassem, 2014. "Causal relationships between energy consumption, foreign direct investment and economic growth: Fresh evidence from dynamic simultaneous-equations models," Energy Policy, Elsevier, vol. 67(C), pages 913-922.

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