The Nexus of Foreign Direct Investment, Economic Growth and Environment in Pakistan

Abstract

This paper estimate the impact of sectoral FDI on economic growth and carbon dioxide emissions in Pakistan. To this end, it uses time series secondary data from 1972 to 2011 and applies Auto Regressive Distributed Lag (ARDL) models. The results showed that FDI inflows in manufacturing, transport, storage and communication sectors and energy consumption have positive effect on the GDP growth of Pakistan. Besides, FDI inflow in manufacturing, transport, storage and communication sector and population density are responsible for the CO2 emissions in Pakistan. The results also validate Environmental Kuznet Curves in both long and short run. JEL Classification: E2, O4, Q5 Keywords: Sectoral FDI, CO2 emissions, Environmental Kuznet Curves, Gross Domestic Product Growth