None-linear nexus between natural resources dependency, foreign direct investment, and environmental sustainability in newly industrialized countries

Abstract

This study explores the non-linear effect of natural resource rents and foreign direct investment (FDI) on consumption-based carbon emissions in Newly Industrialized Economies (NIEs) from 1995 to 2020. Furthermore, this study examines the interactive effect of mineral resources and FDI, coal resources, and FDI using the method of moments quantile regression (MMQR). It also apply dynamic ordinary least square (DOLS), fully modified ordinary least square (FMOLS), and fixed effect-ordinary least square (FE-OLS) for the robustness. The preliminary findings confirm that cross-sectional units are interdependent with slope heterogeneity and panel cointegration. The subsequent results through MMQR reflect that mineral rents and coal rents tend to increase the carbon emissions across all the quantiles (0.10th to 0.90th); however, the average change in the dependent variable is higher at higher-order quantiles (0.60th-0.90th) and lower at lower order quantiles (0.10th to 0.30th). FDI tends to control trade-adjusted carbon emissions in all three ranges of quantiles. The interactive effect of mineral resources and FDI and coal resources and FDI support a significant reduction in carbon emissions. These findings suggest promoting the international flow of investment in the energy-efficient and natural resource industry for sustainable development.