Mitigating Environmental Degradation With Institutional Quality and Foreign Direct Investment (FDI): New Evidence From Asymmetric Approach

Abstract

Chile is currently rated among the performing countries towards the achievement of the global goals of reducing carbon emission. It is on recorded that Chile as a country has moved from highly insufficient to insufficient and still working towards conforming to the recommend the region of 20C in quest of controlling climate change through carbon emission reduction. From this development, it is essential to investigate on the country’s strategies in achieving this success and equally make recommendation for other countries to adopt Chile’s strategy as a blue print in controlling carbon emission. To effectively do this and achieve the objective of this study, I adopt nonlinear and asymmetric approaches to have a combine (positive and negative) view of the reactions of the selected variable towards determining the impact of each variable towards curbing emission in Chile. Also, a careful selection of variable which includes economic growth (GDP per capita-Y), institutional quality, foreign direct investment (FDI), fossil fuels and renewable energy consumption was undertaken in this study. The focus was on the interaction of institutional quality and FDI towards ascertainment of environment performance. Chile’s quarterly data of 1996Q1 to 2018Q4 was utilized and the following findings were made: positive and negative shocks to the economic growth, institutional quality and renewable energy impacted favorably and negatively on Chile’s environment through reduction and promotion of emission respectively. In contrast, positive and negative shocks to FDI and fossil fuels impact both negatively on the Chile’s environment through increase in carbon emission. So institutional quality is vital in controlling the negative impact from FDI and fossil fuels.

Does foreign direct investment asymmetrically influence carbon emissions in sub-Saharan Africa? Evidence from nonlinear panel ARDL approach

“…It is instructive to note that foreign direct investment shocks may be expected to have different effects on the carbon emissions of countries. Recent empirical studies have shown that the effects of foreign direct investment could be asymmetric (Gao et al 2022;Udemba 2021). In other words, positive foreign direct investment shocks do not have an equivalent negative foreign direct investment shocks.…”