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A Dynamic Approach to the FDI-Environment Nexus: The Case of China and India

Author

Listed:
  • Jungho Baek

    (University of Alaska Fairbanks)

  • Won W. Koo

    (North Dakota State University)

Abstract

An autoregressive distributed lag (ARDL) model is applied to examine the short- and long-run relationships among foreign direct investment (FDI), economic growth, and the environment in China and India. We find that, for China, FDI tends to deteriorate environmental quality in both the short- and long-run. For India, on the other hand, FDI is found to have a detrimental effect on the environment in the short-run, but has little effect in the long-run. Finally, it is found that income growth in both countries tends to worsen the environment in both short- and long-run.

Suggested Citation

  • Jungho Baek & Won W. Koo, 2009. "A Dynamic Approach to the FDI-Environment Nexus: The Case of China and India," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 13(2), pages 87-106.
    • Handle: RePEc:ris:eaerev:0116
    DOI: 10.11644/KIEP.JEAI.2009.13.2.202
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F18 - International Economics - - Trade - - - Trade and Environment
    • 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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