Causal modeling of the effect of foreign direct investment, industry growth and energy use to carbon dioxide emissions

Abstract

Application of path analysis for causal modeling has been widely used in many areas of studies, such as in social science, education, biology, medical, sociology, and economics. In this study, path analysis is applied to test a relationship model among variables: Foreign direct investment (FDI), industry growth (IND), energy use (ENR), and carbon dioxide (CO2) emissions. Aims of this study are to know whether there exist direct effect of FDI to IND, direct effect of FDI and IND to ENR, and direct effect of IND and ENR to CO2 emissions. Results of analysis show that there is a direct effect of FDI to IND where the effect is determined as 0.3597; parameter estimate is significant and meaningfulness. There is direct effect of FDI and IND to ENR. Effect of FDI to ENR is identified as 0.2736; parameter estimate is not significant, but the value is still meaningfulness. Direct effect of IND to ENR is −0.4975; parameter estimate is very significant. There is a direct effect of IND and ENR to CO2 emissions. Effect of IND to CO2 emissions is 0.0557; parameter estimate is not significant, but the value is still meaningfulness. Direct effect of ENR to CO2 emissions is 0.9597 where parameter estimate is very significant and meaningfulness.