The pollution concern in the era of globalization: Do the contribution of foreign direct investment and trade openness matter?

Sofien Tiba and Belaid Fateh

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Abstract: This analysis aims to treat the contribution of the foreign direct investment inflows and trade openness to environmental degradation. Drawing on the data for 27 African countries over the period from 1990 to 2013, we develop an empirical model based on a set of panel methods. This approach includes Westerlund (2007) panel cointegration technic, Common Correlated Effects Mean Group (CCE-MG) estimation procedure, and the Granger causality test. In terms of long-term causality, our findings reveal bidirectional long-term causality between CO2/NOx emissions, GDP, trade openness, and foreign direct investment. Besides, in the short-run, the results recorded a unidirectional causality running from GDP to CO2, and from FDI to CO2. However, bidirectional causality nexus was detected between trade openness and CO2. Additionally, the findings portray bidirectional causality between GDP and NOx and between trade openness and NOx, while a unidirectional causality from foreign direct investment to NOx. Our analysis substantiates the importance of the foreign direct investment inflows and trade openness in mitigating the adverse effect of heavy pollutant activities and resolving the environmental puzzle (growing without polluting) consistent with the Millennium Development Goals (MGDs) of the UN background.

Keywords: Foreign direct investment; Trade openness; CO2 emissions; NOx emissions; Environmental quality (search for similar items in EconPapers)
Date: 2020-10
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Citations: View citations in EconPapers (34)

Published in Energy Economics, 2020, 92, pp.104966. ⟨10.1016/j.eneco.2020.104966⟩

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Journal Article: The pollution concern in the era of globalization: Do the contribution of foreign direct investment and trade openness matter? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03271491

DOI: 10.1016/j.eneco.2020.104966

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