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Foreign Direct Investment and Environmental Degradation in Algeria: An ARDL Approach

Author

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  • Amine TAMMAR

    (University Blida2, Algeria)

Abstract

This study investigates the relationship between foreign direct investment (FDI) and environmental degradation in Algeria from 1990 to 2022. Employing an Autoregressive Distributed Lag (ARDL) approach, the research analyses the short- and long-run impacts of FDI, GDP growth, fossil fuel consumption, and manufacturing emissions on CO2 emissions per capita. The ARDL model reveals a weak positive short-run relationship between FDI and CO2 emissions, consistent with the pollution haven hypothesis. However, in the long run, no significant relationship exists. GDP growth significantly impacts CO2 emissions, aligning with the Environmental Kuznets Curve. Unexpectedly, manufacturing emissions show an inverse relationship with overall pollution, possibly due to Algeria’s less industrialised, rent-based economy. The study concludes that Algeria needs stronger institutional frameworks and sustainable policies to mitigate FDI’s environmental impact.

Suggested Citation

  • Amine TAMMAR, 2025. "Foreign Direct Investment and Environmental Degradation in Algeria: An ARDL Approach," Management and Economics Review, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(2), pages 352-364, June.
    • Handle: RePEc:rom:merase:v:10:y:2025:i:2:p:352-364
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    File URL: https://mer.ase.ro/files/2025-2/10-2-5.pdf
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    More about this item

    Keywords

    foreign direct investment; environmental degradation; Algeria; ARDL; CO2 emissions; Pollution Haven Hypothesis.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • 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
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • 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

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