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The Impact of Financial Development, Foreign Direct Investment and Geopolitical Risk on CO2 Emissions: Evidence from Turkey

Author

Listed:
  • Åžehmus AYDIN
  • Ferhat ÖZTUTUÅž
  • Ä°brahim Halil POLAT

Abstract

The rise in greenhouse gas emissions, particularly carbon dioxide (COâ‚‚), represents one of the most significant challenges facing humanity's existence in the 21st century. It is crucial to implement the measures to reduce these emissions to achieve environmental sustainability. Turkey, along with many nations, is striving to reduce its COâ‚‚ emissions in accordance with the United Nations' 2030 Sustainable Development Goals. This study explores the effects of financial development (FIN), foreign direct investment (FDI), and geopolitical risk (GPR) on Turkey's COâ‚‚ emissions, using annual data from 1985 to 2022. To investigate long-term relationships among these variables, we apply the RALS-Fourier ADF (RALS-FADF) unit root test, the Fractional Fourier ADL (FFADL) cointegration test, and the Fully Modified Ordinary Least Squares (FMOLS) method. The evidence from the FMOLS show that FIN, FDI, and GPR lead to higher CO2 emissions in Turkey over time. It is concluded that any policies designed to achieve a sustainable environmental quality in Turkey must consider mitigating the negative effects of the financial development, foreign direct investment and geopolitical risks on the environment.

Suggested Citation

  • Åžehmus AYDIN & Ferhat ÖZTUTUÅž & Ä°brahim Halil POLAT, 2024. "The Impact of Financial Development, Foreign Direct Investment and Geopolitical Risk on CO2 Emissions: Evidence from Turkey," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 3.
    • Handle: RePEc:fis:journl:240329
    DOI: 10.25295/fsecon.1513450
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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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