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Relationship among Foreign Direct Investment, Economic Growth and CO2 Emission: A Panel Data Analysis

Author

Listed:
  • Mohd Shahidan Shaari

    (Universiti Malaysia Perlis, Malaysia)

  • Nor Ermawati Hussain

    (Universiti Utara Malaysia, Malaysia)

  • Hussin Abdullah

    (Universiti Utara Malaysia, Malaysia)

  • Syahida Kamil

    (Universiti Malaysia Perlis, Malaysia.)

Abstract

This study aims to investigate the effects of foreign direct investment and economic growth on CO2 emission. The panel data for the period of 1992 to 2012 from 15 developing countries were collected. The Johansen co-integration was conducted and the results show that there is co- integrated relationship between the variables (FDI, CO2 and GDP). Then the FMOLS was done and it was found that in the long run foreign direct investment does not have any effect on CO2 emission. Therefore, it suggests that an increase in FDI does not influence CO2 emission. However an increase in economic growth can intensify CO2 emission. Therefore, the developing countries should formulate policies on the environment in order to accomplish economic sustainability. At last, Granger causality based on VECM was employed and the results suggest there is no effect of FDI and GDP on CO2 emission in the short run.

Suggested Citation

  • Mohd Shahidan Shaari & Nor Ermawati Hussain & Hussin Abdullah & Syahida Kamil, 2014. "Relationship among Foreign Direct Investment, Economic Growth and CO2 Emission: A Panel Data Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 706-715.
    • Handle: RePEc:eco:journ2:2014-04-19
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    References listed on IDEAS

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    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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