Abstract
Because of the harmful influence of CO2 emissions on the environment and humans, issues related to CO2 emissions have received considerable attention in recent years. Based on the pollution haven hypothesis and pollution halo effect, the uncertain effect of bilateral foreign direct investment (FDI) on CO2 emissions has recently been in focus. Moreover, because of the opposing capital flow of bilateral FDI, the interaction between inward FDI (IFDI) and outward FDI (OFDI) might have a trade-off effect on CO2 emissions. The accurate forecasting of CO2 emissions in China in light of effect of the bilateral FDI is important since the government can use it to regulate emissions’ reduction. The grey multivariable Verhulst model (GMVM) was formulated in this paper with the goal of forecasting CO2 emissions in China by considering the nonlinear, independent, and interaction-related effects of bilateral FDI on them. To enhance the accuracy of prediction, this paper used the Fourier series and the grey prediction model for residual modifications. The empirical results showed that the IFDI and the item of the interaction of bilateral FDI promoted CO2 emissions, whereas OFDI reduced them in China. These results also verified the higher precision of the improved GMVM relative to other models. This paper also used improved GMVM to further forecast CO2 emissions and provided suggestions for the Chinese government to plan for foreign investment, including selectively implementing bilateral FDI, and focusing on the trade-off in its interaction-related effects.
Highlights
With the implementation of the “Reform and Opening Up” policy, the Chinese government has accomplished certain goals of the “bring in and go out” strategy (Zheng and Sheng 2017)
This paper explored the relationship between CO2 emissions, and inward foreign direct investment (IFDI), outward foreign direct investment (OFDI), and the interaction item of bilateral foreign direct investment (FDI) in China based by developing a grey prediction model that incorporates the residual modification model into a grey multivariable Verhulst model
Due to the increase in bilateral FDI, the effects of IFDI and OFDI on CO2 emissions have emerged as important issues in China
Summary
With the implementation of the “Reform and Opening Up” policy, the Chinese government has accomplished certain goals of the “bring in and go out” strategy (Zheng and Sheng 2017). Unlike the uncertain effect of IFDI on C O2 emissions, previous studies have claimed that OFDI positively affects CO2 emission reduction in home countries through the transfer of highly polluting industries as well as enhancements in environmental protection technologies (Luo and Cheng 2013). Because forecasting C O2 emissions by considering the effects of bilateral FDI is a typical multivariable system problem, the grey multivariable GM(1,N) model, which works well with a small sample and poor information, and does not make any statistical assumption, has drawn considerable research interest. Unlike the grey univariable GM(1,1) model, the GM(1,N) model takes into consideration the relationship of the variables describing system behavior with other relevant ones. It is better suited for modeling and forecasting in multivariable systems.
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