Skip to main content

Advertisement

SpringerLink
Log in

Capital flow and environmental quality at crossroads: designing a sustainable policy framework for the newly industrialized countries

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

A Correction to this article was published on 03 June 2023

This article has been updated

Abstract

It is extremely difficult for emerging economies to achieve the Sustainable Development Goals (SDGs), and in order to close this policy gap, a comprehensive policy framework is needed. The purpose of this research is to determine the proportional impacts of domestic and foreign capital to environmental degradation in newly industrialized nations (NICs). For this reason, panel data methodology is used to evaluate, for the years 1991 to 2018, how the ecological footprint is affected by stock market capitalization, foreign direct investment, economic growth, urbanization, and energy intensity. Using the squared terms of stock market capitalization and foreign direct investment, respectively, it is also looked at whether domestic and foreign capital may have non-linear effects on the environment. According to the empirical findings, whereas local capital growth worsens the environment, increasing international capital prevents environmental degradation. There is an inverted U-shaped link between domestic capital and environmental degradation in the event of non-linearity, but foreign capital has a monotonically declining effect on environmental degradation. The study outcomes are utilized to design a policy framework to address the objectives of SDG 7, SDG 11, and SDG 13.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Data availability

Available upon request.

Change history

References

  • Abdouli M, Hammami S (2016) Investigating the causality links between environmental quality, foreign direct investment and economic growth in MENA countries. Int Bus Rev 26:264–278

    Google Scholar 

  • Adebayo TS, Ullah S, Kartal MT, Ali K, Pata UK, Ağa M (2023) Endorsing sustainable development in BRICS: the role of technological innovation, renewable energy consumption, and natural resources in limiting carbon emission. Sci Total Environ 859:160181

    CAS  Google Scholar 

  • Ajide KB, Adeniyi O (2010) FDI and the environment in developing economies: evidence from Nigeria. Environ Res 4(4):291–297

    Google Scholar 

  • Al-Mulali U, Tang CF, Ozturk I (2015) Does financial development reduce environmental degradation? Evidence from a panel study of 129 countries. Environ Sci Pollut Res 22(19):14891–14900

    CAS  Google Scholar 

  • Amri F (2016) The relationship amongst energy consumption, foreign direct investment and output in developed and developing countries. Renew Sustain Energy Rev 64:694–702

    Google Scholar 

  • Asghari M (2013) Does FDI promote MENA Region’s environmental quality? Pollution halo or pollution haven hypothesis. IJRES 1(6):92–100

    Google Scholar 

  • Baek J (2016) A new look at the FDI-income-energy-environment nexus: dynamic panel data analysis of ASEAN. Energy Policy 91:22–27

    Google Scholar 

  • Baek J, Koo WW (2009) Adynamic approach to the FDI-environment nexus: the case of China and India. East Asian Economic Review 13:87–106

    Google Scholar 

  • Boddin D (2016) The role of newly industrialized economies in global value chains. IMF Working Paper, WP/16/207

    Google Scholar 

  • Boutabba MA (2014) The impact of financial development, income, energy and trade on carbon emissions: evidence from the Indian economy. Econ Model 40:33–41

    Google Scholar 

  • Caglar AE (2023) Can nuclear energy technology budgets pave the way for a transition toward low-carbon economy: insights from the United Kingdom. Sustain Dev 31(1):198–210

    Google Scholar 

  • Caglar AE, Mert M (2022) Carbon hysteresis hypothesis as a new approach to emission behavior: a case of top five emitters. Gondw Res 109:171–182

    CAS  Google Scholar 

  • Caglar AE, Ulug M (2022) The role of government spending on energy efficiency R&D budgets in the green transformation process: insight from the top-five countries. Environ Sci Pollut Res 29(50):76472–76484

    Google Scholar 

  • Caglar AE, Yavuz E, Mert M, Kilic E (2022) The ecological footprint facing asymmetric natural resources challenges: evidence from the USA. Environ Sci Pollut Res:1–14

  • Charfeddine L, Khediri KB (2015) Financial development and environmental quality in UAE: cointegration with structural breaks. Renew Sustain Energy Rev 55:1322–1335

    Google Scholar 

  • Charfeddine L, Khediri KB (2016) Financial development and environmental quality in UAE: cointegration with structural breaks. Renew Sustain Energy Rev 55:1322–1335

    Google Scholar 

  • Cole MA, Elliot RJ, Strobl E (2008) The environmental performance of firms: the role of foreign ownership, training and experience. Ecol Econ 65:538–546

    Google Scholar 

  • De Haas R, Popov A (2018) Financial development and industrial pollution. London School of Economics

    Google Scholar 

  • Defilla S (2019) Improving energetic sustainability and resilience of APEC cities through results-oriented monitoring. China, APEC Sustainable Energy Center, Tianjin University

    Google Scholar 

  • Destek MA (2021) Deindustrialization, reindustrialization and environmental degradation: evidence from ecological footprint of Turkey. J Clean Prod 296:126612

    CAS  Google Scholar 

  • Destek MA, Aydın S (2022) An empirical note on tourism and sustainable development nexus. Environ Sci Pollut Res 29(23):34515–34527

    Google Scholar 

  • Destek MA, Manga M (2021) Technological innovation, financialization, and ecological footprint: evidence from BEM economies. Environ Sci Pollut Res 28(17):21991–22001

    Google Scholar 

  • Destek MA, Okumus I (2017) Disaggregated energy consumption and economic growth in G-7 countries. Energy Sources, Part B: Economics, Planning, and Policy 12(9):808–814

    Google Scholar 

  • Destek MA, Okumus I (2019) Does pollution haven hypothesis hold in newly industrialized countries? Evidence from ecological footprint. Environ Sci Pollut Res 26(23):23689–23695

    Google Scholar 

  • Destek MA, Sarkodie SA (2019) Investigation of environmental Kuznets curve for ecological footprint: the role of energy and financial development. Sci Total Environ 650:2483–2489

    CAS  Google Scholar 

  • Destek MA, Sarkodie SA, Asamoah EF (2021) Does biomass energy drive environmental sustainability? An SDG perspective for top five biomass consuming countries. Biomass Bioenerg 149:106076

    CAS  Google Scholar 

  • Destek MA, Sohag K, Aydın S, Destek G (2022) Foreign direct investment, stock market capitalization, and sustainable development: relative impacts of domestic and foreign capital. Environ Sci Pollut Res:1–13

  • Dietz T, Rosa EA (1994) Rethinking the environmental impacts of population, affluence and technology. Hum Ecol Rev 1(2):277–300

    Google Scholar 

  • Dogan E, Turkekul B (2016) CO2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environ Sci Pollut Res 23(2):1203–1213

    Google Scholar 

  • Duarte LDRV, Kedong Y, Xuemei L (2017) The relationship between FDI, economic growth and financial development in Cabo Verde. Int J Econ Financ 9(5):132–142

    Google Scholar 

  • Dumitrescu EI, Hurlin C (2012) Testing for Granger non-causality in heterogeneous panels. Econ Model 29(4):1450–1460

    Google Scholar 

  • Ehrlich PR, Holdren JP (1971) Impact of population growth. Science 171(3977):1212–1217

    CAS  Google Scholar 

  • Eskeland GS, Harrison AE (2003) Moving to greener pastures? Multinationals and the pollution haven hypothesis. J Dev Econ 70(1):1–23

    Google Scholar 

  • Fauzel S (2017) The impact of FDI on CO2 emission in a small island developing state: A cointegration approach. Econ Bus Lett 6(1):6–13

    Google Scholar 

  • Göll E, Uhl A, Zwiers J (2019) Sustainable development in the MENA region. Middle East and North Africa Regional Architecture, European Commission

    Google Scholar 

  • Grossman G, Krueger A (1995) Economic environment and the economic growth. Q J Econ 110(2):353–377

    Google Scholar 

  • He W, Gao G, Wang Y (2012) The relationship of energy consumption, economic growth and foreign direct investment in Shanghai. Advances in Applied Economics and Finance 3(1):507–512

    Google Scholar 

  • Hoffmann R, Lee CG, Ramasamy B, Yeung M (2005) FDI and pollution: a Granger causality test using panel data. J Int Dev 17(3):311–317

    Google Scholar 

  • Hung SW, Li CM, Shen MY (2018) Regional analysis of the relationship between CO2 emissions and financial development. IJGEI 41(1-4):2–13

    Google Scholar 

  • Im KS, Pesaran MH, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econom 115(1):53–74

    Google Scholar 

  • Işik C, Kasımatı E, Ongan S (2017) Analyzing the causalities between economic growth, financial development, international trade, tourism expenditure and/on the CO2 emissions in Greece. Energy Sources, Part B: Economics, Planning, and Policy 12(7):665–673

    Google Scholar 

  • Jalil A, Feridun M (2011) The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Econ 33(2):284–291

    Google Scholar 

  • Javid M, Sharif F (2016) Environmental Kuznets curve and financial development in Pakistan. Renew Sustain Energy Rev 54:406–414

    Google Scholar 

  • Ji X, Chen B (2017) Assessing the energy-saving effect of urbanization in China based on stochastic impacts by regression on population, affluence and technology (STIRPAT) model. J Clean Prod 163:S306–S314

    Google Scholar 

  • Keho Y (2016) Trade openness and the impact of foreign direct investment on CO2 emissions: econometric evidence from ECOWAS countries. J Econ SustainDev 7(18):151–157

    Google Scholar 

  • Khan AQ, Saleem N, Fatima ST (2018) Financial development, income inequality, and CO2 emissions in Asian countries using STIRPAT model. Environ Sci Pollut Res 25(7):6308–6319

    CAS  Google Scholar 

  • Kivyiro P, Arminen H (2014) Carbon dioxide emissions, energy consumption, economic growth, and foreign direct investment: causality analysis for Sub-Saharan Africa. Energy 74:595–606

    CAS  Google Scholar 

  • Kızılkaya O (2017) The impact of economic growth and foreign direct investment on CO2 emissions: the case of Turkey. Turk Econ Rev 4(1):106–118

    Google Scholar 

  • Lee JW (2013) The contribution of foreign direct investment to clean energy use, carbon emissions and economic growth. Energ Policy 55:483–489

    Google Scholar 

  • Levin A, Lin CF, Chu CSJ (2002) Unit root tests in panel data: asymptotic and finite-sample properties. J Econom 108(1):1–24

    Google Scholar 

  • Liddle B, Lung S (2010) Age-structure, urbanization, and climate change in developed countries: revisiting STIRPAT for disaggregated population and consumption-related environmental impacts. Popul Environ 31(5):317–343

    Google Scholar 

  • Linh DH, Lin SM (2012) CO2 emissions, energy consumption, economic growth and FDI in Vietnam. Manag Glob Transit 12(3):219–232

    Google Scholar 

  • List J, Co CY (2000) The effect of environmental regulation on foreign direct investment. J Environ Econ Manage 40(1):1–40

    Google Scholar 

  • Liu H, Sinha A, Destek MA, Alharthi M, Zafar MW (2022) Moving toward sustainable development of sub-Saharan African countries: investigating the effect of financial inclusion on environmental quality. Sustain Dev 30(6):2015–2024

    Google Scholar 

  • Long PD, Ngoc BH, My DTH (2018) The relationship between foreign direct investment, electricity consumption and economic growth in Vietnam. Int J Energy Econ Policy 8(3):267–274

    Google Scholar 

  • Manga M, Cengiz O, Destek MA (2023) Is export quality a viable option for sustainable development paths of Asian countries? Environ Sci Pollut Res:1–24

  • Martorano B, Sanfilippo M (2017) What factors drive successful industrialization? Evidence and implications for developing countries. Department of Policy, Research and Statistics, United Nations Industrial Development Organization

    Google Scholar 

  • Mielnik O, Goldemberg J (2002) Foreign direct investment and decoupling between energy and gross domestic product in developing countries. Energ Policy 30(2):87–89

    Google Scholar 

  • Monge-Naranjo A, Kenichi U (2017) Industrial revolutions and global imbalances. Discussion Paper Series 17-E-067. The Research Institute of Economy, Trade and Industry, Japan

    Google Scholar 

  • Nazlioglu S, Soytas U (2012) Oil price, agricultural commodity prices, and the dollar: a panel cointegration and causality analysis. Energy Econ 34(4):1098–1104

    Google Scholar 

  • Okumus I, Guzel AE, Destek MA (2021) Renewable, non-renewable energy consumption and economic growth nexus in G7: fresh evidence from CS-ARDL. Environ Sci Pollut Res 28(40):56595–56605

    Google Scholar 

  • Omri A, Khuong ND, Rault C (2014) Causal interactions between CO2 emissions, FDI, and economic growth: evidence from dynamic simultaneous equation models. Econ Model 42:382–389

    Google Scholar 

  • Ozturk I, Acaravci A (2013) The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Econ 36:262–267

    Google Scholar 

  • Paramati SR, Apergis N, Ummalla M (2017b) Financing clean energy projects through domestic and foreign capital: the role of political cooperation among the EU, the G20 and OECD countries. Energy Econ 61:62–71

    Google Scholar 

  • Paramati SR, Mo D, Gupta R (2017c) The effects of stock market growth and renewable energy use on CO2 emissions: evidence from G20 countries. Energy Econ 66:360–371

    Google Scholar 

  • Paramati SR, Ummalla M, Apergis N (2016) The effect of foreign direct investment and stock market growth on clean energy use across a panel of emerging market economies. Energy Econ 56:29–41

    Google Scholar 

  • Pata UK, Destek MA, Manga M, Cengiz O (2023b) Militarization of NATO countries sparks climate change? Investigating the moderating role of technological progress and financial development. J Clean Prod 409:137241

  • Pata UK, Erdogan S, Ozkan O (2023a) Is reducing fossil fuel intensity important for environmental management and ensuring ecological efficiency in China? J Environ Manage 329:117080

    Google Scholar 

  • Pedroni P (1999) Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxf Bull Econ Stat 61(S1):653–670

    Google Scholar 

  • Pedroni P (2001) Fully modified OLS for heterogeneous cointegrated panels. In: Nonstationary panels, panel cointegration, and dynamic panels. Emerald Group Publishing Limited, pp 93–130

    Google Scholar 

  • Phillips PC, Hansen BE (1990) Statistical inference in instrumental variables regression with I (1) processes. Rev Econ Stud 57(1):99–125

    Google Scholar 

  • Sadorsky P (2014) The effect of urbanization on CO2 emissions in emerging economies. Energy Econ 41:147–153

    Google Scholar 

  • Saidi K, Mbarek MB (2017) The impact of income, trade, urbanization, and financial development on CO2 emissions in 19 emerging economies. Environ Sci Pollut Res 24(14):12748–12757

    CAS  Google Scholar 

  • Salahuddin M, Gow J, Ozturk I (2015) Is the long-run relationship between economic growth, electricity consumption, carbon dioxide emissions and financial development in Gulf Cooperation Council Countries robust? Renew Sustain Energy Rev 51:317–326

    CAS  Google Scholar 

  • Salazar-Xirinachs JM, Nübler I, Kozul-Wright R (2014) Transforming economies: making industrial policy work for growth, jobs and development. International Labour Office, Geneva

    Google Scholar 

  • Shaari MS, Hussain NE, Abdullah H, Kamil S (2014) Relationship among foreign direct investment, economic growth and CO2 emission: a panel data analysis. Int J Energy Econ Policy 4(4):706–715

    Google Scholar 

  • Shahbaz M, Destek MA, Polemis ML (2018) Do foreign capital and financial development affect clean energy consumption and carbon emissions? Evidence from BRICS and Next-11 countries. SPOUDAI-J Bus Econ 68(4):20–50

    Google Scholar 

  • Shahbaz M, Destek MA, Dong K, Jiao Z (2021) Time-varying impact of financial development on carbon emissions in G-7 countries: evidence from the long history. Technol Forecast Soc Change 171:120966

    Google Scholar 

  • Shahbaz M, Hye Q, Tiwari AK, Leitão NC (2013c) Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renew Sustain Energy Rev 25:109–121

    Google Scholar 

  • Shahbaz M, Loganathan N, Muzaffar AT, Ahmed K, Jabran MA (2016) How urbanization affects CO2 emissions in Malaysia? The application of STIRPAT model. Renew Sustain Energy Rev 57:83–93

    CAS  Google Scholar 

  • Shahbaz M, Mallick H, Mahalik MK, Loganathan N (2015b) Does globalization impede environmental quality in India? Ecol Indic 52:379–393

    Google Scholar 

  • Shahbaz M, Nasreen S, Abbas F, Anis O (2015a) Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries? Energy Econ 51:275–287

    Google Scholar 

  • Shahbaz M, Sinha A (2019) Environmental Kuznets curve for CO2 emissions: a literature survey. J Econ Stud 46(1):106–168

    Google Scholar 

  • Shahbaz M, Solarin SA, Mahmood H, Arouri M (2013b) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ. Model 35:145–152

    Google Scholar 

  • Shahbaz M, Tiwari AK, Nasir M (2013d) The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa. Energ Policy 61:1452–1459

    Google Scholar 

  • Solarin SA, Al-Mulali U (2018) Influence of foreign direct investment on indicators of environmental degradation. Environ Sci Pollut Res 25(25):24845–24859

    Google Scholar 

  • Tamazian A, Chousa JP, Vadlamannati KC (2009) Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries. Energ Policy 37(1):246–253

    Google Scholar 

  • Tamazian A, Rao B (2010) Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies Energy Economics 32(1):137–145

    Google Scholar 

  • Tang CF, Tan EC (2018) Does the sources of foreign direct investment matter to economic growth in Malaysia? Glob Econ Rev 47(2):174–181

    Google Scholar 

  • United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)  (2016) 2016 Regional trends report: energy for sustainable development in Asia and the Pacific.

  • United Nations Habitat (2018) Transformative urban mobility initiative TUMI two years on 2. https://unhabitat.org/transformative-urban-mobility-initiative-tumi-two-years-on-2

    Google Scholar 

  • United Nations (2014) Prototype global sustainable development report. United Nations Department of Economic and Social Affairs, New York

    Google Scholar 

  • United Nations (2018) The Sustainable Development Goals Report 2018. https://unstats.un.org/sdgs/report/2018.

    Google Scholar 

  • Wackernagel M, Rees W (1998) Our ecological footprint: reducing human impact on the earth. Electronic Green Journal 17:1–30

    Google Scholar 

  • Wang P, Wu W, Zhu B, Wei Y (2013) Examining the impact factors of energy-related CO2 emissions using the STIRPAT model in Guangdong Province, China. Appl Energy 106:65–71

    CAS  Google Scholar 

  • World Bank (2021) World Development Indictors. https://data.worldbank.org/indicator

    Google Scholar 

  • Zhang C, Zhou X (2016) Does foreign direct investment lead to lower CO2 emissions? Evidence from a regional analysis in China. Renew Sustain Energy Rev 58:943–951

    Google Scholar 

  • Zhang Y (2011) The impact of financial development on carbon emissions: an empirical analysis in China. Energ Policy 39:2197–2203

    Google Scholar 

  • Zhu H, Duan L, Guo Y, Yu K (2016) The effect of FDI, economic growth and energy consumption on carbon emissions in ASEAN-5: evidence from panel quantile regression. Econ Model 58:237–248

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, Gaziantep University, Gaziantep, Turkey

    Mehmet Akif Destek & Ferda Nakipoglu Ozsoy

  2. Management Development Institute, Gurgaon, India

    Avik Sinha

  3. Riphah School of Business and Management, Riphah International University, Lahore, Pakistan

    Muhammad Wasif Zafar

Authors
  1. Mehmet Akif Destek
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Avik Sinha
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Ferda Nakipoglu Ozsoy
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Muhammad Wasif Zafar
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

Mehmet Akif Destek: study of conception and design, acquisition of data, drafting of the manuscript. Avik Sinha: drafting of the manuscript and critical revision. Ferda Nakipoglu Ozsoy: acquisition of data and drafting of the manuscript. Muhammad Wasif Zafar: critical revision.

Corresponding author

Correspondence to Muhammad Wasif Zafar.

Ethics declarations

Ethics approval and consent to participate

Ethical approval and informed consent are not applicable for this study.

Consent for publication

Consent for publication is not applicable.

Competing interests

The authors declare no competing interests.

Additional information

Responsible Editor: Arshian Sharif

We confirmed that this manuscript has not been published elsewhere and is not under consideration by another journal.

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

The original online version of this article was revised: The correct name of the city in the 2nd affiliation is Gurgaon.

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Destek, M.A., Sinha, A., Ozsoy, F.N. et al. Capital flow and environmental quality at crossroads: designing a sustainable policy framework for the newly industrialized countries. Environ Sci Pollut Res 30, 76746–76759 (2023). https://doi.org/10.1007/s11356-023-27794-5

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-023-27794-5

Keywords

Search

Navigation