On the relationship between foreign direct investment and energy consumption: The Mexican case

Abstract

This paper is aimed at analyzing the interrelation between Foreign Direct Investment (FDI) and energy consumption (EC) in Mexico during the period 1970-2014. To do that, we carry out a cointegration test and a Granger causality analysis. The empirical results from the cointegration test show a stable link between the growth rates of FDI and EC in the long run. While the results from Granger’s causality show that in the short run there is a unidirectional Granger causality from the growth rate of FDI toward the growth rate EC, while in the medium and long there is a bidirectional causality between the growth rates of FDI and EC in Mexico during the period under study.