Relationship among Foreign Direct Investment, Economic Growth and CO2 Emission: A Panel Data Analysis


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Authors

  • Mohd Shahidan Shaari Universiti Malaysia Perlis
  • Nor Ermawati Hussain Universiti Utara Malaysia
  • Hussin Abdullah Universiti Utara Malaysia
  • Syahida Kamil Universiti Malaysia Perlis

Abstract

This study aims to investigate the effects of foreign direct investment and economic growth on CO2 emission. The panel data for the period of 1992 to 2012 from 15 developing countries were collected. The Johansen co-integration was conducted and the results show that there is co-integrated relationship between the variables (FDI, CO2 and GDP). Then the FMOLS was done and it was found that in the long run foreign direct investment does not have any effect on CO2 emission. Therefore, it suggests that an increase in FDI does not influence CO2 emission. However an increase in economic growth can intensify CO2 emission. Therefore, the developing countries should formulate policies on the environment in order to accomplish economic sustainability. At last, Granger causality based on VECM was employed and the results suggest there is no effect of FDI and GDP on CO2 emission in the short run. Keywords: CO2 emissions; economic growth; foreign direct investment JEL Classifications: Q4; Q5

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Author Biographies

Mohd Shahidan Shaari, Universiti Malaysia Perlis

School of Business Innovation and Technopreneurship

Nor Ermawati Hussain, Universiti Utara Malaysia

School of Economics, Finance and Banking, College of Business

Hussin Abdullah, Universiti Utara Malaysia

School of Economics, Finance and Banking, College of Business

Syahida Kamil, Universiti Malaysia Perlis

School of Business Innovation and Technopreneurship

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Published

2014-09-24

How to Cite

Shaari, M. S., Hussain, N. E., Abdullah, H., & Kamil, S. (2014). Relationship among Foreign Direct Investment, Economic Growth and CO2 Emission: A Panel Data Analysis. International Journal of Energy Economics and Policy, 4(4), 706–715. Retrieved from https://www.econjournals.com/index.php/ijeep/article/view/887

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