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CO2 Emissions, Foreign Direct Investments, Energy Consumption, and GDP in Developing Countries: A More Comprehensive Study using Panel Vector Error Correction Model

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  • Suyi Kim

    (Hongik University)

Abstract

This paper examines the causal relationships among carbon dioxide (CO2) emissions, energy consumption, gross domestic product (GDP), and foreign direct investments (FDI) in 57 developing countries from 1980 to 2013. The results of the analysis based on panel vector error correction model (VECM) indicate no direct short-run causality exists from FDI to CO2 emissions. These results are also confirmed by regional analysis, wherein the developing countries are divided into three regions. In the long run, a cointegrated relationship is found among CO2 emissions, energy consumption, GDP, and FDI, which supports the environmental Kuznets curve hypothesis. However, the long-run elasticity of FDI on CO2 emissions is very small even though it is statistically significant. These results do not support the pollution haven hypothesis of CO2 emissions through inward FDI in developing countries.

Suggested Citation

  • Suyi Kim, 2019. "CO2 Emissions, Foreign Direct Investments, Energy Consumption, and GDP in Developing Countries: A More Comprehensive Study using Panel Vector Error Correction Model," Korean Economic Review, Korean Economic Association, vol. 35, pages 5-24.
    • Handle: RePEc:kea:keappr:ker-20190101-35-1-01
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    2. Lee, Chien-Chiang & Zhao, Ya-Nan, 2023. "Heterogeneity analysis of factors influencing CO2 emissions: The role of human capital, urbanization, and FDI," Renewable and Sustainable Energy Reviews, Elsevier, vol. 185(C).
    3. Siddhartha Pradeep, 2022. "Role of monetary policy on CO2 emissions in India," SN Business & Economics, Springer, vol. 2(1), pages 1-33, January.
    4. Alina Zaharia & Maria Claudia Diaconeasa & Laura Brad & Georgiana-Raluca Lădaru & Corina Ioanăș, 2019. "Factors Influencing Energy Consumption in the Context of Sustainable Development," Sustainability, MDPI, vol. 11(15), pages 1-28, August.
    5. Yongrok Choi & Hyoungsuk Lee & Jahira Debbarma, 2020. "Are Global Companies Better in Environmental Efficiency in India? Based on Metafrontier Malmquist CO 2 Performance," Sustainability, MDPI, vol. 12(20), pages 1-19, October.
    6. Faik Bilgili & Masreka Khan & Ashar Awan, 2023. "Is there a gender dimension of the environmental Kuznets curve? Evidence from Asian countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(3), pages 2387-2418, March.
    7. Fuzhong Chen & Guohai Jiang & Kangyin Dong, 2022. "How do FDI inflows curvilinearly affect carbon emissions? Threshold effects of energy service availability and cleanliness," Australian Economic Papers, Wiley Blackwell, vol. 61(4), pages 798-824, December.
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    More about this item

    Keywords

    CO2 Emissions; Energy Consumption; GDP; FDI; Panel VECM; Cointegration;
    All these keywords.

    JEL classification:

    • 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
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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