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Foreign Direct Investment, Environmental Pollution and Economic Growth—An Insight from Non-Linear ARDL Co-Integration Approach

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  • Thi Thuy Hang Le

    (Banking and Finance Faculty, University of Finance-Marketing, Ho Chi Minh City 700000, Vietnam)

  • Van Chien Nguyen

    (Institute of Graduate Studies, Thu Dau Mot University, Thu Dau Mot City 75000, Vietnam)

  • Thi Hang Nga Phan

    (Department of Scientific Management, University of Finance-Marketing, Ho Chi Minh City 700000, Vietnam)

Abstract

The paper examines the impact of foreign direct investment and environmental pollution on economic growth in an emerging economy. We used annual data covering the period of 1986–2020 and the non-linear autoregressive distributed lag (NARDL) to analyze the positive and negative co-integrated variables, and our findings support the asymmetric relationship between foreign direct investment, environmental pollution and economic growth in both the short and long run, as well as a long-run relationship between environmental pollution and economic growth. A one-percent increase in environmental pollution leads to a positive change in economic performance by 0.662 percent. Adversely, a one-percent decrease in environmental pollution leads to a negative change in economic performance by 0.212 percent. Vietnam is an emerging market, and capital needs for economic activities are essential. However, the research results show that a disproportionate impact of foreign direct investment on economic growth is recorded in the long run, and a disproportionate impact of environmental pollution on the economy occurs in both the short and long term. Therefore, the government needs to have policies to attract foreign investment to develop a green and sustainable economy.

Suggested Citation

  • Thi Thuy Hang Le & Van Chien Nguyen & Thi Hang Nga Phan, 2022. "Foreign Direct Investment, Environmental Pollution and Economic Growth—An Insight from Non-Linear ARDL Co-Integration Approach," Sustainability, MDPI, vol. 14(13), pages 1-14, July.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:13:p:8146-:d:855483
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    Cited by:

    1. Nguyen Thi Phuong Thu & Le Mai Huong & Vu Ngoc Xuan, 2022. "Factors Affecting Environmental Pollution for Sustainable Development Goals—Evidence from Asian Countries," Sustainability, MDPI, vol. 14(24), pages 1-14, December.
    2. Hou Renyong & Aman Ali Sedik, 2023. "Environmental Sustainability and Foreign Direct Investment in East Africa: Institutional and Policy Benefits for Environmental Sustainability," Sustainability, MDPI, vol. 15(2), pages 1-22, January.
    3. Van Chien Nguyen, 2023. "Monetary Policy and Foreign Direct Investment—Empirical Evidence," Economies, MDPI, vol. 11(9), pages 1-13, September.
    4. Duyen Dang Thi Thuy, 2023. "Energy and Agricultural Development in the Red River Delta Provinces, Vietnam," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 216-224, July.

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