Moderating impact of FDI on the growth-environment nexus in the pre-COVID-19 eras

Abstract

This paper aims to investigate the moderating presence of FDI in the nexus between economic progression and quality of environment in 115 countries, and various income panels of countries from 1992 to 2019, based on a theoretical underpinning of the Environmental Kuznets Curve (EKC). The results reveal a significant positive influence of energy consumption on CO2 discharges across all income panels. The interaction between FDI and square of GDP leads to a decrease in CO2 emissions for low and lower-middle income countries, whereas a drop in PM2.5 discharges is distinctively recorded for low, lower middle, high income, and overall income levels. Likewise, the interaction of FDI with manufacturing growth exhibits a negative influence on CO2 emissions reduction in both low and lower-middle income economies, and a reduction in CH4 discharges for upper-middle, high income, and overall income levels. All these results support the EKC hypothesis and offer a useful insight for countries that intend to pursue green economic growth with due consideration for energy consumption and environmental pollution.