Re-examination of pollution haven hypothesis for Turkey with Fourier approach

Which is more important, foreign direct investment inflow or outflow, on the pollution of European Union countries? Evidence from Panel Fourier symmetric and asymmetric causality

Uncertainty remains regarding the impact of foreign direct investments on countries' environmental policies and pollution levels. Therefore, this study examines the relationship between foreign direct investment inflows, outflows, and carbon dioxide emissions for EU (European Union) member states. Accordingly, the data for the period 1993-2019 were subjected to the Panel Fourier symmetric and asymmetric causality tests for 21 EU countries. According to the Panel Fourier symmetric causality test results, the effect of foreign investment outflows on carbon dioxide emissions is more dominant in general. While there is a bidirectional relationship between these variables in the Austrian and Slovak Republics, there is a unidirectional relationship between foreign investment outflows to carbon dioxide emissions in Belgium, Bulgaria, Cyprus, Ireland, and Portugal. On the other hand, one-way causality was found from foreign investment inflows to carbon dioxide emissions in Belgium, Cyprus, France, Ireland, and Romania and from carbon dioxide emissions to foreign investment inflows in Finland, Greece, and Sweden. According to the Panel Fourier asymmetric causality test results, causality between variables is statistically significant in many countries. This shows that the asymmetric relationship is essential for the variables.

Environmental impact of foreign direct investment in Turkey: does the quality of institutions matter? Evidence from time series analysis using the Fourier extension

Since the 1980s, Turkey has experienced a significant increase in both foreign direct investment (FDI) and its ecological footprint (EFP). While FDI is widely acknowledged as a pivotal driver of economic growth, its impact on environmental degradation is multifaceted and debated. Moreover, a country's institutional framework plays a key role in shaping this relationship. Yet, the influence of institutional structures on the FDI-environment nexus is often neglected in current literature. In this study, we investigate the environmental implications of FDI in Turkey from 1984 to 2018, employing time series analysis with a Fourier extension and accounting for institutional quality. Fourier function models give more effective results in modeling structural breaks. We first use Fourier techniques to assess the unit root and cointegration relationship. Upon establishing cointegration, we employ the DOLS estimator, extended with Fourier terms, to determine the long-term coefficients. We then assess the causal relationship between the variables using the Fourier causality test. Our findings indicate that while FDI exacerbates environmental degradation (supporting the pollution haven hypothesis), the interaction term of FDI-institutional quality mitigates this degradation (supporting the pollution halo hypothesis). Given these empirical findings, this study suggests that strengthening Turkey's institutional quality has the potential to amplify the environmental advantages of FDI, alongside its economic benefits.

The environmental cost of FDI and spatial implications of CO2 emissions in Sub-Saharan Africa

This study endeavors to investigate the environmental cost of FDI inflows in the Sub-Saharan African (SSA) region over the period of 2006 to 2020. There are two opposing theories about how FDI impacts the environment, namely, the pollution halo hypothesis (PHH) and the pollution haven hypothesis (PH). Given the SSA region's poor environmental performance and potential spatial spillover effects on neighboring nations, the study underlines the necessity to look into the pollution hypotheses in the region. The examination is carried out through non-spatial and spatial panel data econometric approaches. The empirical findings provide evidence that an increase in FDI inflow by 1% in SSA is positively associated with increasing levels of CO2 emissions by 0.03% on average, thus validating the notion of a pollution haven in the region. Furthermore, the study reveals that the environmental spillovers of CO2 emissions are not confined to the host country alone, but also extend to neighboring nations. Other key determinants of CO2 emissions, including GDP, population, and urbanization, were also found to be positively linked to CO2 emissions, whereas the use of renewable energy resources was found to have a mitigating effect. The empirical findings offer valuable insights for policymakers and stakeholders in the SSA region. These insights highlight the importance of the adoption of renewable energy sources and enacting regulatory measures to monitor the environmental cost of FDI, with the aim of mitigating the deleterious consequences of CO2 emissions, not only in the host nation but also in the neighboring nations.