Abstract
This paper aims to re-examine the effect of foreign direct investment on environment quality using the load capacity factor in 16 Middle East and North African nations from 1990 to 2018. The study utilizes several econometric models to test linear and nonlinear effects and identify potential U- and inverted N-shaped relationships between foreign direct investments and environment quality. The analysis also examines the environmental Kuznets curve hypothesis by testing for U- and inverted N-shaped relationships between gross domestic product per capita and environment sustainability. The results indicate an inverted U-shaped relationship between foreign direct investment and environment quality. Furthermore, the cubic model results show an N-shaped relationship between gross domestic product per capita and environment quality, supporting the environmental Kuznets curve hypothesis. In contrast, no N-shaped relationship exists between foreign direct investment and environment quality. These results demonstrate the importance of economic growth and foreign direct investment in improving environmental conditions in the region through the necessity of attracting environmentally friendly investments.
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Data Availability
The data used to support the findings of this study is available from the corresponding author upon request.
Abbreviations
- MENA:
-
Middle East and North African countries
- FDI:
-
Foreign direct investment
- CO2 :
-
Carbon dioxide
- PHH:
-
Pollution haven hypothesis
- PHAH:
-
Pollution halo hypothesis
- EKC:
-
Environmental Kuznets curve
- GDP:
-
Gross domestic product
- EF:
-
Ecological footprints
- LCF:
-
Load capacity factor
- ARDL:
-
Auto regressive distributed lags
- FMOLS:
-
Fully modified ordinary least squares
- DOLS:
-
Dynamic ordinary least squares
- STIRPAT:
-
Stochastic Impacts by Regression, Affluence, and Technology
- PVAR:
-
Panel Vector Auto Regressive model
- GCC:
-
Gulf Council Cooperation
- PMG:
-
Pooled Mean Group Estimation
- PSTR:
-
Panel Smooth Transition Regression Model
- ICT:
-
Information and Communications Technology
- PIIGS:
-
Portugal, Italy, Ireland, Greece, and Spain
- BRICS:
-
Brazil, Russia, India, China and South Africa
- MINT:
-
Mexico, Indonesia, Nigeria, and Turkey
- URB:
-
Urbanization
- ENE:
-
Energy consumption
- GDP2 and GDP3:
-
Squared and cubic gross domestic product respectively
- FDI2 and FDI3:
-
Squared and cubic foreign direct investment respectively
- SL:
-
Significance level
- SCD:
-
Cross-section dependence
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Ayad, H., Lefilef, A., Jahanger, A. et al. Reinvestigate the Effect of Foreign Direct Investment on Environmental Quality in the MENA Region: Is There Any Difference Using the Load Capacity Factor?. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01629-7
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DOI: https://doi.org/10.1007/s13132-023-01629-7