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Energy Savings via Foreign Direct Investment? - Empirical evidence from Portugal

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  • João Paulo Bento

    (Research Unit in Governance, Competitiveness and Public Policy and Department of Economics Management and Industrial Engineering, University of Aveiro, 3810-193 Aveiro, Portugal)

Abstract

This study runs a cointegration analysis on annual data from 1980 to 2007 to investigate the relationship between primary energy consumption, economic growth and net inflows of foreign direct investment with the Engle and Granger method, Stock-Watson dynamic ordinary least squares (DOLS), the bounds testing approach to cointegration and error correction modelling. The empirical results suggest that there is a stable long run linear cointegration relationship between these three variables. While income has a large and positive influence on energy consumption, the results point to a small but negative effect of foreign direct investment (FDI) on energy consumption. As for the short-run relationship among the series, the estimation and inference in the autoregressive distributed lag error correction model (ARDL) further confirm this link. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign investment can induce energy conservation without obstructing economic growth.

Suggested Citation

  • João Paulo Bento, 2011. "Energy Savings via Foreign Direct Investment? - Empirical evidence from Portugal," Working Papers 2011/24, Maastricht School of Management.
  • Handle: RePEc:msm:wpaper:2011/24
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    File URL: http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2011-24.pdf
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    Cited by:

    1. Sethi, Amarjit Singh & Kaur, Supreet, 2013. "Physical Capital Formation And Income Relationships: A Temporal Analysis For Punjab And Haryana," Journal of Regional Development and Planning, JRDP, vol. 2(2), pages 109-130.
    2. Omri, Anis & Kahouli, Bassem, 2014. "Causal relationships between energy consumption, foreign direct investment and economic growth: Fresh evidence from dynamic simultaneous-equations models," Energy Policy, Elsevier, vol. 67(C), pages 913-922.
    3. Jing Xu & Min Zhou & Hailong Li, 2016. "ARDL-based research on the nexus among FDI, environmental regulation, and energy consumption in Shanghai (China)," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 84(1), pages 551-564, October.
    4. Zaman, Khalid & Khan, Muhammad M. & Ahmad, Mehboob & Rustam, Rabiah, 2012. "Determinants of electricity consumption function in Pakistan: Old wine in a new bottle," Energy Policy, Elsevier, vol. 50(C), pages 623-634.

    More about this item

    Keywords

    energy consumption; economic growth; foreign direct investment; cointegration;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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