The Impact of Financial Development, Foreign Direct Investment, and Trade Openness on Carbon Dioxide Emissions in Jordan: An ARDL and VECM Analysis Approach

Jamal Alnsour (), Abdullah Radwan Arabeyyat, Ahmad Jamal Alnsour and Nashat Ali Almasria
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Jamal Alnsour: Department of Project Planning & Management, the Faculty of Business, Al-Balqa Applied University, Al-Salt 19117, Jordan
Abdullah Radwan Arabeyyat: Department of Project Planning & Management, the Faculty of Business, Al-Balqa Applied University, Al-Salt 19117, Jordan
Ahmad Jamal Alnsour: BLOM Bank, Amman P.O. Box 930312, Jordan
Nashat Ali Almasria: Business Faculty, A’Sharqiyah University, Ibra 400, Oman

JRFM, 2024, vol. 17, issue 11, 1-20

Abstract: Jordan has made substantial strides in enhancing its economy by focusing on economic growth stimulants, which include financial development, foreign direct investment (FDI), and trade openness. However, these economic activities often lead to significant environmental risks. Despite their relevance, the existing literature has rarely examined the influence of these dynamics on environmental quality in the Middle East, particularly in Jordan. This study aims to investigate the influence of financial development, FDI, and trade openness on carbon dioxide (CO 2 ) emissions in Jordan. To achieve this, the study employs the Autoregressive Distributed Lag (ARDL) technique and the Vector Error Correction Model (VECM) Granger causality approach, utilizing data sourced from the World Bank for the period from 1990 to 2022. The findings indicate that financial development, FDI, and trade openness positively impact CO 2 emissions, thereby increasing environmental risks in both the short and long term. Additionally, there exists a bidirectional causal relationship between financial development and both FDI and trade openness, as well as between FDI and trade openness. It is imperative for Jordan to design strategies that balance economic growth with sustainable environmental practices.

Keywords: financial development; FDI; trade openness; CO 2 emissions; Jordan (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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