Capital Flow and Environmental Quality at Crossroads: Designing a Sustainable Policy Framework for the Newly Industrialized Countries

Mehmet Destek, Avik Sinha, Ferda Nakıpoglu Özsoy and Muhammad Wasif Zafar

MPRA Paper from University Library of Munich, Germany

Abstract: It is extremely difficult for emerging economies to achieve the Sustainable Development Goals (SDGs), and in order to close this policy gap, a comprehensive policy framework is needed. The purpose of this research is to determine the proportional impacts of domestic and foreign capital to environmental degradation in newly industrialized nations (NICs). For this reason, panel data methodology is used to evaluate, for the years 1991 to 2018, how the ecological footprint is affected by stock market capitalization, foreign direct investment, economic growth, urbanization, and energy intensity. Using the squared terms of stock market capitalization and foreign direct investment, respectively, it is also looked at whether domestic and foreign capital may have non-linear effects on the environment. According to the empirical findings, whereas local capital growth worsens the environment, increasing international capital prevents environmental degradation. There is an inverted U-shaped link between domestic capital and environmental degradation in the event of non-linearity, but foreign capital has a monotonically declining effect on environmental degradation. Additionally, it has been discovered that while using more non-renewable energy causes more environmental deterioration, using more renewable energy improves the quality of the environment. The study outcomes are utilized to design a policy framework to address the objectives of SDG 7, SDG 11, and SDG 13.

Keywords: Foreign Direct Investment; Stock Market; Ecological Footprint; Environmental Degradation (search for similar items in EconPapers)
JEL-codes: Q5 (search for similar items in EconPapers)
Date: 2023-02-06
New Economics Papers: this item is included in nep-ene and nep-env
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