Analyzing the Effect of Foreign Direct Investment and Trade Openness on Environmental Quality and Clean Energy: A Study of the Selected Developing Countries

Document Type : Research Paper

Authors

1 Professor of Economics, University of Isfahan, Department of Economics

2 Ph.D. Candidate, University of Isfahan, Department of Economics

Abstract

Foreign direct investment (FDI) and increased trade volume have been known as resources for capital accumulation and economic growth in developing countries. FDI and trade are also associated with  technology transfer, linkages with international markets, and transfer of management skills. However, increasing economic growth requires higher energy consumption, which leads to environmental degradation in these countries. This study probes the effect of foreign direct investment and trade openness on Carbon dioxide emissions (as an indicator of environmental quality) and clean energies in the selected developing countries using a panel-ARDL approach during 1971-2014. The findings of this study reveal that despite the positive and significant effects of direct foreign investment on economic growth and the use of clean energy, they have no significant effect on the environmental degradation in these countries. The results also show that trade openness has a positive and significant correlation with carbon dioxide emissions, while this variable has a negative and significant effect on clean energy consumption. Finally, the results of the study indicate that the speed of adjustment towards long-term equilibrium in this model is relatively slow.
 

Keywords

References

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new economy and trad
Volume 13, Issue 4
July 2019
Pages 1-27

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History

  • Receive Date: 05 August 2008
  • Revise Date: 08 September 2018
  • Accept Date: 14 November 2018

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