Exploring the Nexus Among FDI Inflows, Environmental Quality, Human Capital, and Economic Growth in the Mediterranean Region

Abstract

This article investigates the links between FDI inflows, environmental quality, human capital, and economic growth in the Mediterranean region for the period of 1990–2013. Using both dynamic OLS and fully modified OLS methods, we find that (i) there is bidirectional causality between economic growth, FDI inflows, CO2 emissions, and human capital for all the considered panels, except in the Euro and Asian Mediterranean countries panel there is a unidirectional causality from FDI inflows to human capital as well as from human capital to FDI inflows; (ii) with the exception of the African Mediterranean countries panel, there is unidirectional causality running from GDP to FDI inflows as well as from GDP to human capital, from FDI to human capital, and from human capital to CO2 emissions. These empirical insights are of particular interest to policymakers to build sound policies to promote economic growth and improving environmental quality.