Research Article
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Year 2023, Issue: 38, 1 - 17, 28.07.2023
https://doi.org/10.26650/ekoist.2023.38.1090992

Abstract

References

  • Abbas, H. S. M., Xu, X., & Sun, C. (2021). Role of foreign direct investment interaction to energy consumption and institutional governance in sustainable GHG emission reduction. Environmental Science and Pollution Research, 28(40), 56808-56821. google scholar
  • Abdouli, M., & Hammami, S. (2017). Exploring links Between FDI Inflows, Energy Consumption, And Economic Growth: Further Evidence From MENA Countries. Journal of economic development, 42(1). google scholar
  • Abidin, I. S. Z., Haseeb, M., Azam, M., & Islam, R. (2015). Foreign direct investment, financial Development, international trade and energy consumption: Panel data evidence from selected ASEAN Countries. International Journal of Energy Economics and Policy, 5(3), 841-850. google scholar
  • Adom, P K., Opoku, E. E. O., & Yan, I. K. M. (2019). Energy demand-FDI nexus in Africa: do FDIs induce dichotomous paths?. Energy Economics, 81, 928-941. google scholar
  • Amoako, S., & Insaidoo, M. (2021). Symmetric impact of FDI on energy consumption: Evidence from Ghana. Energy, 223, 120005. google scholar
  • Amri, F. (2016). The relationship amongst energy consumption, foreign direct investment and output in developed and developing countries. Renewable and Sustainable Energy Reviews, 64, 694-702. google scholar
  • Aremo, A. G., & Ojeyinka, T. A. (2018). Foreign direct investment, energy consumption, carbon emissions and economic growth in Nigeria (1970-2014): an aggregate empirical analysis. International Journal of Green Economics, 12(3-4), 209-227. google scholar
  • Baek, J., & Choi, Y. J. (2017). Does foreign direct investment harm the environment in developing countries? Dynamic panel analysis of Latin American countries. Economies, 5(4), 39. google scholar
  • Balsalobre-Lorente, D., Driha, O. M., Halkos, G., & Mishra, S. (2022). Influence of growth and urbanization on CO2 emissions: The moderating effect of foreign direct investment on energy use in BRICS. Sustainable Development, 30(1), 227-240. google scholar
  • Behera, S. R., & Dash, D. P. (2017). The effect of urbanization, energy consumption, and foreign direct investment on the carbon dioxide emission in the SSEA (South and Southeast Asian) region. Renewable and Sustainable Energy Reviews, 70, 96-106. google scholar
  • Bujari, A., & Venegas-Martinez, F. (2021). On the relationship between foreign direct investment and energy consumption: The Mexican case. International Journal of Energy Economics and Policy, 11(3), 231. google scholar
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical association, 74(366a), 427-431. google scholar
  • Dong, B., Gong, J., & Zhao, X. (2012). FDI and environmental regulation: pollution haven or a race to the top?. Journal of Regulatory economics, 41(2), 216-237. google scholar
  • Granger, C. W. (1969). Investing Causal Relations by Econometric Models and Cross-Spectral Methods, Econometrica: Journal of the Econometric Society, 37(3), 424-438. google scholar
  • Hanif, I., Raza, S. M. F., Gago-de-Santos, P., & Abbas, Q. (2019). Fossil fuels, foreign direct investment, and economic growth have triggered CO2 emissions in emerging Asian economies: some empirical evidence. Energy, 171, 493-501. google scholar
  • Hentschel, L. (1995). All in the family nesting symmetric and asymmetric garch models. Journal of financial economics, 39(1), 71-104. google scholar
  • Islam, M., Khan, M. K., Tareque, M., Jehan, N., & Dagar, V. (2021). Impact of globalization, foreign direct investment, and energy consumption on CO2 emissions in Bangladesh: Does institutional quality matter?. Environmental Science and Pollution Research, 28(35), 48851-48871. google scholar
  • Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12 (2-3), 231-254. google scholar
  • Kapetanios, G., Shin, Y., & Snell, A. (2003). Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics, 112(2), 359-379. google scholar
  • Kapetanios, G., Shin, Y., & Snell, A. (2006). Testing for cointegration in nonlinear smooth transition error correction models. Econometric Theory, 22(2), 279-303. google scholar
  • Kivyiro, P., & Arminen, H. (2014). Carbon dioxide emissions, energy consumption, economic growth, and foreign direct investment: Causality analysis for Sub-Saharan Africa. Energy, 74, 595-606. google scholar
  • Konisky, David M. “Regulator attitudes and the environmental race to the bottom argument.” Journal of Public Administration Research and Theory 18, no. 2 (2008): 321-344. google scholar
  • Kruse, R. (2011). A new unit root test against ESTAR based on a class of modified statistics. Statistical Papers, 52(1), 71-85. google scholar
  • Kuo, K. C., Chang, C. Y., Chen, M. H., & Chen, W. Y. (2012). In search of causal relationship between FDI, GDP, and energy consumption-Evidence from China. In Advanced Materials Research (Vol. 524, pp. 3388-3391). Trans Tech Publications Ltd. google scholar
  • Latief, R., & Lefen, L. (2019). Foreign direct investment in the power and energy sector, energy consumption, and economic growth: Empirical evidence from Pakistan. Sustainability, 11(1), 192. google scholar
  • Li, K., & Qi, S. (2016). Does FDI increase industrial energy consumption of China? Based on the empirical analysis of Chinese provinces industrial panel data. Emerging Markets Finance and Trade, 52(6), 1305-1314. google scholar
  • Lin, B., & Benjamin, I. N. (2018). Causal relationships between energy consumption, foreign direct investment and economic growth for MINT: Evidence from panel dynamic ordinary least square models. Journal of Cleaner Production, 197, 708-720. google scholar
  • Lu, J., Imran, M., Haseeb, A., Saud, S., Wu, M., Siddiqui, F., & Khan, M. J. (2021). Nexus between financial development, FDI, globalization, energy consumption and environment: evidence from BRI countries. Frontiers in Energy Research, 466. google scholar
  • Mavikela, N., & Khobai, H. (2018). Investigating the Link Between Foreign direct investment, Energy consumption and Economic growth in Argentina. google scholar
  • Muhammad, B., & Khan, M. K. (2021). Foreign direct investment inflow, economic growth, energy consumption, globalization, and carbon dioxide emission around the world. Environmental Science and Pollution Research, 28(39), 55643-55654. google scholar
  • Neumayer, E. (2000). Pollution havens: Why be afraid of international factor mobility? London School of Economics and Political Science mimeo. google scholar Omri, A., & Kahouli, B. (2014). Causal relationships between energy consumption, foreign direct investment, and economic growth: Fresh evidence from dynamic simultaneous-equations models. Energy Policy, 67, 913-922. google scholar
  • Salim, R., Yao, Y., Chen, G., & Zhang, L. (2017). Can foreign direct investment harness energy consumption in China? A time series investigation. Energy Economics, 66, 43-53. google scholar
  • Sarkodie, S. A., & Strezov, V. (2019). Effect of foreign direct investments, economic development, and energy consumption on greenhouse gas emissions in developing countries. Science of the Total Environment, 646, 862-871. google scholar
  • Shabir, M., Ali, M., Hashmi, S. H., & Bakhsh, S. (2022). Heterogeneous effects of economic policy uncertainty and foreign direct investment on environmental quality: Cross-country evidence. Environmental Science and Pollution Research, 29(2), 2737-2752. google scholar
  • Sheldon, Ian. “Trade and environmental policy: A race to the bottom?.” Journal of Agricultural Economics 57, no. 3 (2006): 365-392. google scholar
  • Singhania, M., & Saini, N. (2021). Demystifying pollution haven hypothesis: Role of FDI. Journal of Business Research, 123, 516-528. google scholar
  • Terasvirta, T. (1994). Specification, estimation, and evaluation of smooth transition autoregressive models. Journal of the american Statistical association, 89(425), 208-218. google scholar
  • Tong, H. (2007). Birth of the threshold time series model. Statistica Sinica, 17(1), 8-14. google scholar
  • Udemba, E. N., Magazzino, C., & Bekun, F. V. (2020). Modeling the nexus between pollutant emission, energy consumption, foreign direct investment, and economic growth: new insights from China. Environmental science and pollution research, 27(15), 17831-17842. google scholar
  • Wang, C., & Jiayu, C. (2019). Analyzing on the impact mechanism of foreign direct investment (FDI) to energy consumption. Energy Procedia, 159, 515-520. google scholar
  • Yandle, B. (2004). Environmental turning points, institutions, and the race to the top. The Independent Review, 9(2), 211-226. google scholar
  • Yoon, H., & Heshmati, A. (2017). Do environmental regulations effect FDI decisions? The pollution haven hypothesis revisited. google scholar
  • Zhang, C., & Zhou, X. (2016). Does foreign direct investment lead to lower CO2 emissions? Evidence from a regional analysis in China. Renewable and Sustainable Energy Reviews, 58, 943-951. google scholar

Testing Linear and Nonlinear Relationships Between Foreign Direct Investment and Fossil Energy Consumption in Fragile Five Countries

Year 2023, Issue: 38, 1 - 17, 28.07.2023
https://doi.org/10.26650/ekoist.2023.38.1090992

Abstract

The global warming and climate change problem is causing severe threats for the present and the future. The excessive utilization of fossil energy resources, especially on the production side, has contributed greatly to global warming by producing the greenhouse effect. In this respect, it is essential to assess the impact of foreign direct investment (FDI), which is expected to increase the production and employment of countries, on the utilization of fossil fuels. In this study, we investigate the relationship between FDI and fossil energy consumption (EC) utilizing such tests as: Johansen linear cointegration, Kapetanios, Shin, and Snell (2006) nonlinear cointegration, the linear Error Correction Model (ECM), Exponential Smooth Autoregressive (ESTAR) ECM, Granger (1969) linear causality, and Diks and Panchenko (2006) nonlinear causality. In this context, annual data covering the period between 1980 and 2020 are employed for the “Fragile Five” countries, which are: Brazil, Indonesia, India, Turkey, and South Africa. By applying the Augmented Dickey Fuller (ADF) linear unit root test, we found that the series became stationary after taking the first difference. Following the unit root test results, Johansen's (1988) linear cointegration test results indicated that there existed a cointegration relationship from FDI to EC for Turkey and South Africa, while Kapetanios, Shin, and Snell's (2006) nonlinear cointegration test results revealed that there existed a cointegration relationship from FDI to EC in South Africa. In addition, the linear error correction model was proven to be valid for Turkey and South Africa, while the ESTAR nonlinear error correction model is valid only for Turkey. Finally, Granger's (1969) causality test results proved that there was a causal relationship from FDI to EC in Turkey. Dicks and Panchenko (2006) stated that there was no causal relationship between the variables.

References

  • Abbas, H. S. M., Xu, X., & Sun, C. (2021). Role of foreign direct investment interaction to energy consumption and institutional governance in sustainable GHG emission reduction. Environmental Science and Pollution Research, 28(40), 56808-56821. google scholar
  • Abdouli, M., & Hammami, S. (2017). Exploring links Between FDI Inflows, Energy Consumption, And Economic Growth: Further Evidence From MENA Countries. Journal of economic development, 42(1). google scholar
  • Abidin, I. S. Z., Haseeb, M., Azam, M., & Islam, R. (2015). Foreign direct investment, financial Development, international trade and energy consumption: Panel data evidence from selected ASEAN Countries. International Journal of Energy Economics and Policy, 5(3), 841-850. google scholar
  • Adom, P K., Opoku, E. E. O., & Yan, I. K. M. (2019). Energy demand-FDI nexus in Africa: do FDIs induce dichotomous paths?. Energy Economics, 81, 928-941. google scholar
  • Amoako, S., & Insaidoo, M. (2021). Symmetric impact of FDI on energy consumption: Evidence from Ghana. Energy, 223, 120005. google scholar
  • Amri, F. (2016). The relationship amongst energy consumption, foreign direct investment and output in developed and developing countries. Renewable and Sustainable Energy Reviews, 64, 694-702. google scholar
  • Aremo, A. G., & Ojeyinka, T. A. (2018). Foreign direct investment, energy consumption, carbon emissions and economic growth in Nigeria (1970-2014): an aggregate empirical analysis. International Journal of Green Economics, 12(3-4), 209-227. google scholar
  • Baek, J., & Choi, Y. J. (2017). Does foreign direct investment harm the environment in developing countries? Dynamic panel analysis of Latin American countries. Economies, 5(4), 39. google scholar
  • Balsalobre-Lorente, D., Driha, O. M., Halkos, G., & Mishra, S. (2022). Influence of growth and urbanization on CO2 emissions: The moderating effect of foreign direct investment on energy use in BRICS. Sustainable Development, 30(1), 227-240. google scholar
  • Behera, S. R., & Dash, D. P. (2017). The effect of urbanization, energy consumption, and foreign direct investment on the carbon dioxide emission in the SSEA (South and Southeast Asian) region. Renewable and Sustainable Energy Reviews, 70, 96-106. google scholar
  • Bujari, A., & Venegas-Martinez, F. (2021). On the relationship between foreign direct investment and energy consumption: The Mexican case. International Journal of Energy Economics and Policy, 11(3), 231. google scholar
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical association, 74(366a), 427-431. google scholar
  • Dong, B., Gong, J., & Zhao, X. (2012). FDI and environmental regulation: pollution haven or a race to the top?. Journal of Regulatory economics, 41(2), 216-237. google scholar
  • Granger, C. W. (1969). Investing Causal Relations by Econometric Models and Cross-Spectral Methods, Econometrica: Journal of the Econometric Society, 37(3), 424-438. google scholar
  • Hanif, I., Raza, S. M. F., Gago-de-Santos, P., & Abbas, Q. (2019). Fossil fuels, foreign direct investment, and economic growth have triggered CO2 emissions in emerging Asian economies: some empirical evidence. Energy, 171, 493-501. google scholar
  • Hentschel, L. (1995). All in the family nesting symmetric and asymmetric garch models. Journal of financial economics, 39(1), 71-104. google scholar
  • Islam, M., Khan, M. K., Tareque, M., Jehan, N., & Dagar, V. (2021). Impact of globalization, foreign direct investment, and energy consumption on CO2 emissions in Bangladesh: Does institutional quality matter?. Environmental Science and Pollution Research, 28(35), 48851-48871. google scholar
  • Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12 (2-3), 231-254. google scholar
  • Kapetanios, G., Shin, Y., & Snell, A. (2003). Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics, 112(2), 359-379. google scholar
  • Kapetanios, G., Shin, Y., & Snell, A. (2006). Testing for cointegration in nonlinear smooth transition error correction models. Econometric Theory, 22(2), 279-303. google scholar
  • Kivyiro, P., & Arminen, H. (2014). Carbon dioxide emissions, energy consumption, economic growth, and foreign direct investment: Causality analysis for Sub-Saharan Africa. Energy, 74, 595-606. google scholar
  • Konisky, David M. “Regulator attitudes and the environmental race to the bottom argument.” Journal of Public Administration Research and Theory 18, no. 2 (2008): 321-344. google scholar
  • Kruse, R. (2011). A new unit root test against ESTAR based on a class of modified statistics. Statistical Papers, 52(1), 71-85. google scholar
  • Kuo, K. C., Chang, C. Y., Chen, M. H., & Chen, W. Y. (2012). In search of causal relationship between FDI, GDP, and energy consumption-Evidence from China. In Advanced Materials Research (Vol. 524, pp. 3388-3391). Trans Tech Publications Ltd. google scholar
  • Latief, R., & Lefen, L. (2019). Foreign direct investment in the power and energy sector, energy consumption, and economic growth: Empirical evidence from Pakistan. Sustainability, 11(1), 192. google scholar
  • Li, K., & Qi, S. (2016). Does FDI increase industrial energy consumption of China? Based on the empirical analysis of Chinese provinces industrial panel data. Emerging Markets Finance and Trade, 52(6), 1305-1314. google scholar
  • Lin, B., & Benjamin, I. N. (2018). Causal relationships between energy consumption, foreign direct investment and economic growth for MINT: Evidence from panel dynamic ordinary least square models. Journal of Cleaner Production, 197, 708-720. google scholar
  • Lu, J., Imran, M., Haseeb, A., Saud, S., Wu, M., Siddiqui, F., & Khan, M. J. (2021). Nexus between financial development, FDI, globalization, energy consumption and environment: evidence from BRI countries. Frontiers in Energy Research, 466. google scholar
  • Mavikela, N., & Khobai, H. (2018). Investigating the Link Between Foreign direct investment, Energy consumption and Economic growth in Argentina. google scholar
  • Muhammad, B., & Khan, M. K. (2021). Foreign direct investment inflow, economic growth, energy consumption, globalization, and carbon dioxide emission around the world. Environmental Science and Pollution Research, 28(39), 55643-55654. google scholar
  • Neumayer, E. (2000). Pollution havens: Why be afraid of international factor mobility? London School of Economics and Political Science mimeo. google scholar Omri, A., & Kahouli, B. (2014). Causal relationships between energy consumption, foreign direct investment, and economic growth: Fresh evidence from dynamic simultaneous-equations models. Energy Policy, 67, 913-922. google scholar
  • Salim, R., Yao, Y., Chen, G., & Zhang, L. (2017). Can foreign direct investment harness energy consumption in China? A time series investigation. Energy Economics, 66, 43-53. google scholar
  • Sarkodie, S. A., & Strezov, V. (2019). Effect of foreign direct investments, economic development, and energy consumption on greenhouse gas emissions in developing countries. Science of the Total Environment, 646, 862-871. google scholar
  • Shabir, M., Ali, M., Hashmi, S. H., & Bakhsh, S. (2022). Heterogeneous effects of economic policy uncertainty and foreign direct investment on environmental quality: Cross-country evidence. Environmental Science and Pollution Research, 29(2), 2737-2752. google scholar
  • Sheldon, Ian. “Trade and environmental policy: A race to the bottom?.” Journal of Agricultural Economics 57, no. 3 (2006): 365-392. google scholar
  • Singhania, M., & Saini, N. (2021). Demystifying pollution haven hypothesis: Role of FDI. Journal of Business Research, 123, 516-528. google scholar
  • Terasvirta, T. (1994). Specification, estimation, and evaluation of smooth transition autoregressive models. Journal of the american Statistical association, 89(425), 208-218. google scholar
  • Tong, H. (2007). Birth of the threshold time series model. Statistica Sinica, 17(1), 8-14. google scholar
  • Udemba, E. N., Magazzino, C., & Bekun, F. V. (2020). Modeling the nexus between pollutant emission, energy consumption, foreign direct investment, and economic growth: new insights from China. Environmental science and pollution research, 27(15), 17831-17842. google scholar
  • Wang, C., & Jiayu, C. (2019). Analyzing on the impact mechanism of foreign direct investment (FDI) to energy consumption. Energy Procedia, 159, 515-520. google scholar
  • Yandle, B. (2004). Environmental turning points, institutions, and the race to the top. The Independent Review, 9(2), 211-226. google scholar
  • Yoon, H., & Heshmati, A. (2017). Do environmental regulations effect FDI decisions? The pollution haven hypothesis revisited. google scholar
  • Zhang, C., & Zhou, X. (2016). Does foreign direct investment lead to lower CO2 emissions? Evidence from a regional analysis in China. Renewable and Sustainable Energy Reviews, 58, 943-951. google scholar
There are 43 citations in total.

Details

Primary Language English
Subjects Econometrics (Other)
Journal Section RESEARCH ARTICLE
Authors

Ali Çelik 0000-0003-3794-7786

Publication Date July 28, 2023
Submission Date March 21, 2022
Published in Issue Year 2023 Issue: 38

Cite

APA Çelik, A. (2023). Testing Linear and Nonlinear Relationships Between Foreign Direct Investment and Fossil Energy Consumption in Fragile Five Countries. EKOIST Journal of Econometrics and Statistics(38), 1-17. https://doi.org/10.26650/ekoist.2023.38.1090992