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ARDL-based research on the nexus among FDI, environmental regulation, and energy consumption in Shanghai (China)

Jing Xu, Min Zhou () and Hailong Li
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Jing Xu: China University of Mining and Technology
Min Zhou: China University of Mining and Technology
Hailong Li: China University of Mining and Technology

Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, 2016, vol. 84, issue 1, 551-564

Abstract: Abstract Foreign direct investment (FDI) plays a vital role in economic growth in Shanghai but also gives rise to a series of environmental pollution problems. With more voices calling for strengthening of environmental regulations, it is necessary to explore the relationship among FDI, environmental regulations, and energy consumption. We apply autoregressive distributed lag bounds testing approach and error correction-based Granger causality model to verify the connection among these economic variables for the period from 1991 to 2013. The results show that environmental regulations have a negative effect on FDI in both the long and short term. Energy consumption has a significantly positive impact on FDI in the short and long run, but is only significant in the short run. Granger causality results indicate that FDI is a Granger cause of energy consumption, which confirms the validity of the pollution haven hypothesis. Finally, we suggest that stringent environmental regulations and improvements in energy efficiency are required when absorbing FDI inflows.

Keywords: FDI; Environmental regulation; Energy consumption; ARDL; VECM; Shanghai (search for similar items in EconPapers)
Date: 2016
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