The Relationship between Foreign Direct Investment, Economic Growth and Environmental Pollution in Vietnam: An Autoregressive Distributed Lags Approach

Abstract

The nexus between economic growth, environmental pollution, and FDI inflows has been intensively analyzed by a number of studies, but the empirical evidence more often than not remains controversial and ambiguous. This paper investigates the causal relationship between CO2 emissions, foreign direct investment and economic growth for Vietnam over the period 1986-2015. The empirical results provide a strong statistical evidence that overall there is the relationship, which has inverse U-shape between income per capita and environmental degradation in Viet Nam. The turning point's GDP per capita is about 3,145 US Dollar/year. This study suggests that policy-makers should control the environmental standards in the projects to improve environmental pollution and has attracted foreign direct investment of stability to achieve sustainable economic development for the long-run.Keywords: FDI, CO2 emissions, economic growth, Vietnam.JEL Classifications: F21, F43, O44, Q43