Analysing the influence of foreign direct investment and urbanization on the development of private financial system and its ecological footprint

Abstract

In this research, the objective is to examine how private financial development, urbanization and foreign direct investment and economic growth affects the environment using the ecological footprint as an indicator. Panel data was used for 100 countries from 1980 to 2019, classified according to their income level. Several econometric steps were used to estimate the results, such as cointegration and causality techniques. The results show that the private financial system and environmental degradation have a long-term equilibrium relationship, and the incidence is positive, but not significant at the level of the 100 countries. In high-income countries, the private financial system reduces environmental degradation; however, in upper middle-income, lower middle-income and low-income countries, it increases in the long run. Likewise, urbanization plays a predominant role on the ecological footprint in the long term. Meanwhile, the role of foreign direct investment is not stable over time. The causality test shows bidirectional causality between environmental degradation and the private financial system at the global level in high- and upper middle-income countries. However, low-income countries have a unidirectional relationship of environmental degradation to the private financial system. With regard to foreign direct investment, there is a unidirectional causal relationship between environmental degradation and foreign direct investment at the global level and from foreign direct investment to environmental degradation in high-income countries.

Trends of Carbon Emissions and Foreign Direct Investment: Accounting for Ecological Footprints, Renewable Energy, Globalization and Technological Innovations in BRICS

“…2023; Udemba, 2021;Ponce et al 2023). CE and FDI also move in opposite direction as per the results of the study.…”

Studying the Role of Quality of Governance, Renewable Energy and External Monetary Assistance and Their Repercussions on the Ecological Footprint in the Context of Djibouti

“…Considering the availability of the data provided by the global ecological footprint, which is limited to 2018, the research therefore selects a period of twenty years. Researchers often incorporate the ecological footprint metric into their studies based on data availability, aligning it with other factors in terms of temporal congruence, ensuring that the timeframes of these variables are synchronized with the 'Ecological footprint' dependent variable (Ponce et al 2023;Kibria, 2023;Uzar & Eyuboglu, 2023). The comprehensive variable (Main variable) used to measure the global ecological footprint stands for the level of ecological footprint that human actions have on the environment Kihombo et al, 2021).…”

Impact of Foreign Enterprises’ Capital Inflow on Urbanization Factors: Evidence from Northeastern Cities of China

“…The study of Abdouli and Hammami [84] showed, by applying the VAR model, that there is a one-way causal relationship between environmental quality and FDI for 17 countries in the MENA region. When analyzing panel data for 100 countries from 1980 to 2019, Ponce et al [85] found that FDI has a unidirectional effect on environmental deterioration in high-income countries. The research of Lan et al [58] investigates the link between human capital, FDI, and environmental emissions.…”