Is Foreign Direct Investment a Cause of Environmental Degradation in Pakistan? An ARDL Approach to Cointegration

Abstract

This study has investigated the empirical relationship between FDI and environmental degradation in Pakistan and 43 years of data is used in the study started from 1972 to 2014. Empirical tests show that there exist mix-cointegrating series, so ARDL bounds testing is applied to check the short-long run cointegration among the variables. Results concluded that FDI causes CO2 emissions in long and short-run both. To check the direction of causality between variables, an ARDL Granger test is applied. It proved that FDI and CO2 emissions have bidirectional causality and causing each other from both ways.