THE EFFECT OF GOOD GOVERNANCE ON CO2 EMISSIONS AND FDI INFLOWS

Abstract

In the contemporary context, people's attention has turned to the relationship between foreign direct investment (FDI) and environmental concerns. And the good governance that wants to increase the level of FDI inflows and decrease the level of CO2 emissions has also aligned with this trend, to achieve a sustainable development. Thus, through the present research we want to analyse the effect of good governance on CO2 emissions and FDI inflows. The analysed period is between 2002-2021, and to carry out a more detailed analysis we introduced groups of countries. We used panel data methods to test relationships through multiple regression in Stata. In the analysis we considered the 2 factors, FDI and CO2, as dependent variables. We will measure good governance through the prism of 4 indicators, which we will consider as independent variables in our study, namely Trade, the sum of exports and imports of goods and services, Gross capital formation, Government effectiveness and Consumer price index. The results demonstrate a higher level of good governance in reducing CO2, respectively attracting FDI in the group of countries that are part of the EU zone, respectively of the euro zone.