Effects of foreign direct investment and financial development on CO2 emissions globally and by groups of countries

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Published: Dec 6, 2021

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Jessica Armijos
Carrera de Economía, Universidad Nacional de Loja, Loja, Ecuador
Elizabeth Lozano
Carrera de Economía, Universidad Nacional de Loja, Loja, Ecuador

Abstract

This paper aims to verify the effects of foreign direct investment and financial developmenton global carbon dioxide emissions using cointegration techniques.We use data from theWorld Development Indicators (2017), over the period 1970-2016. Using cointegrationtests from Pedroni (1999) andWesterlund (2007) we find the existence of short- and longrunequilibrium between the three variables at the global level and by country groups.The strength of the cointegrating vector is average across total country income groups.Evidence from Dumitrescu and Hurlin (2012) shows that there are unidirectional causalrelationships in high-income countries, upper middle-income countries, and low-incomecountries between per capita pollution gas emissions and foreign direct investment. Thepolicy application derived from the research is that higher income countries should contributesignificantly to the reduction of carbon dioxide emissions with an increase in foreigndirect investment and financial development.

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Armijos, J. ., & Lozano, E. . (2021). Effects of foreign direct investment and financial development on CO2 emissions globally and by groups of countries. Revista Económica, 9(1), 19–34. Retrieved from https://revistas.unl.edu.ec/index.php/economica/article/view/1145
Issue
Vol. 9 No. 1 (2021): RVE Vol 9 (January - June 2021)
Section
RESEARCH ARTICLES
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