The cointegration analysis and a vector error-correction (VEC) model are applied to examine the short- and long-run relationships among foreign direct investment (FDI), economic growth, and the environment in China and India. The results show that FDI inflow plays a pivotal role in determining the short- and long-run movement of economic growth through capital accumulation and technical spillovers in the two countries. However, FDI inflow in both countries is found to have a detrimental effect on environmental quality in both the short- and long-run, supporting pollution haven hypothesis. Finally, it is found that, in the short-run, there exists a unidirectional causality from FDI inflow to economic growth and the environment in China and India - a change in FDI inflow causes a consequence change in environmental quality and economic growth, but the reverse does not hold.

A Dynamic Approach to the FDI-Environment Nexus: The Case of China and India

t In theory the underlying logic entails that, a country should borrow as long as the capital thus acquired produces a rate of return that is higher than the cost of the foreign borrowing. In that event, the economy of the borrowing country will result in increased capacity coupled with expanding output via the aid of foreign savings. With countries in Sub-Saharan Africa adopting an economic development strategy that significantly relies on external financing, the study sets out with the aim to uncover the existent relationship between external debt burden and economic growth for the period 1990 to 2016 in 38 selected Sub-Saharan countries. To do this, panel data econometric techniques of Generalized Method of Moments was employed to evaluate the relationship. The results from the generalized method of moment indicated that, economies of Sub-Saharan Africa are negatively affected by external debt. Also, external debt was found to be more deleterious to middle income economies compared to their counterparts low income economies.

The Impact of External Debt on Economic Growth in Sub-Saharan Africa

Although it is widely recognized that Foreign Direct Investment (FDI) inflows have a dominant effect on economic growth of host countries, the determinants of FDI inflows are still unclear. Especially, about the effect of exchange rate on FDI inflow, the results reached by scholars vary across countries or regions. It is of great practical and theoretical significance to explore the influencing effects of exchange rate on FDI inflow and identify the mechanisms that underlie them in close association with regional economic characters so as to help local government implement targeted government policies to achieve sustainable FDI inflow and sustainable economic growth. For this purpose, the influencing effects and the influencing mechanisms of the exchange rate on FDI inflows are investigated for Zhejiang province, China, over 1985–2019 by employing the co-integration tests, vector error correction models, Granger causality tests, and impulse response tests. Empirical results indicate that there are long-term stable and unidirectional causal relationship between the exchange rate and FDI inflow. Continuous appreciation of RMB against USD discourages FDI inflow. The mechanism which underlies the long-term relationship is the wealth effect, rather than the cost effect or the demand effect. By contrast, in the short run, neither the exchange rate nor the three influencing mechanism has a significant impact on FDI inflow. These results suggest policy recommendations for improving FDI by accumulating human capital and improving infrastructure. These findings are also applicable for other countries or regions with similar economic characters.

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Influence of Exchange Rate on Foreign Direct Investment Inflows: An Empirical Analysis Based on Co-Integration and Granger Causality Test

• Financial development plays a crucial role in accounting for the impact of foreign direct investment on environmental risk. • Financial development is poorly measured in the literature, hence unable to capture the complexity of the modern-day financial systems. • The unmitigated effect of FDI on environmental risk is detrimental. • FDI conditioned on the local financial sector development minimizes environmental risk • Countries with highly developed financial systems are able to curtail the negative impact of FDI on the environment. The study examines the role of financial sector development in the relationship between Foreign direct investment (FDI) and environmental risk using a more comprehensive measurement of financial sector development. The study set up a panel dataset to cover 45 Sub-Saharan African economies from 1982 to 2018 and applies the system GMM technique to accommodate the dynamic nature of the dataset and make provisions for endogeneity and heteroskedasticity in the series. The findings suggest that the unmitigated effect of FDI on environmental risk is detrimental. However, FDI conditioned on the local financial sector development minimizes environmental risk. Again, the findings suggest that countries with low financial sector development indicators report worse environmental risk than their counterparts. The financial sector development is a composite index comprising financial depth, access, and efficiency. Hence, as a matter of policy, we suggest that countries should make a conscious effort to further develop these components by investing in financial infrastructures like technology, regulations, and institutions. 

Environmental Risk and Foreign Direct Investment: the role of Financial Sector Development

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The status quo of research in sustainable FDI: exploring the theoretical agenda and policy inferences in West and Central Africa

In this paper, we use empirical models to examine the main channel through which FDI escalates environmental risk. We explore whether countries with “weak” or better still low tax rate attract “dirty” FDI to deteriorate their environment,The analysis uses a 40-year panel to show that foreign direct investment (FDI) and tax policy matter in accounting for cross-country environmental risk.,Our sample finds support that the tax channel is the main medium through which FDI worsens environmental risk. By discomposing tax policy into low and high regimes, we report that countries that deliberately reform tax policy to bait FDI have higher environmental risk.,A useful lesson from here is that using tax policy to lure FDI amounts to shortchanging capital risk for environmental risk.,The paper is unique because it identifies tax policy as a channel through which FDI affects the environment in Africa. Other studies overly simplifies the relationship between FDI and its impact on the environment, and it makes it difficult and ambiguous in offering specific policy direction.

Environmental risk, FDI and tax reforms: why we must worry

Does the issuance of Eurobonds carry enough information about favourable domestic conditions to warrant more FDI inflows? In this study, the authors investigate how FDI is responding to the rising levels of Eurobonds in sub-Saharan African (SSA).,The study uses the system GMM model to set up a panel with all 17 SSA countries with Eurobonds. The dataset was transformed into time series, and the VAR model and Granger causality were used to diffuse the doubt of a possible bi-causal relationship between Eurobonds and FDI. Additionally, the authors use the impulse response function to test the behaviour of FDI to a one-time shock to Eurobonds.,The study reports that Eurobond levels matter in explaining FDI receipts. Specifically, the authors report that the issuance of Eurobonds leads to a favourable increase in FDI inflows. The authors transform our data into time series and use the VAR model and Granger causality test to diffuse the doubt of a possible bi-causal relationship between Eurobonds and FDI. The authors’ findings from this exercise suggest that two lag levels of Eurobond are a good predictor of future FDI flows. More also, the authors use the impulse response function to test the behaviour of FDI to a one-time shock to Eurobonds and report that a one-unit standard deviation shock to Eurobonds will cause FDI to swell up over at least 8 years.,The study is limited in scope due to data availability. Future studies may consider using countries across the globe that have issued Eurobond to retest the current research objectives.,The study establishes grounds to suggest that the issuance of Eurobonds carry enough information to foreign investors in deciding on the location of FDI.,The study is uniquely opening a new frontier to the discussion on how one international capital can be used to bait other foreign capital. It also discusses signalling theory at the macro level.

Does Eurobond issuance influence FDI location? Evidence from sub-Saharan Africa

Currently, over 1.5 billion people, especially in the Global South, live without access to modern energy for household uses, especially for cooking. Therefore, this study examines the cooking space of the Global South with a specific focus on the rural communities to map alternative energy sources, technologies and supporting policies to drive clean cooking services for improved socioeconomic development. It begins with a literature review on clean cooking technologies and clean energy access for the Global South, which leads to the suggestion of clean cooking policies by mapping technology, affordability, accessibility, climate action, business model and local capacity. In order to ensure that the validation is appropriate, three online questionnaires were designed to capture three categories of key stakeholders with distinctive and complementary interests in clean energy access for cooking: (i) End-users, (ii) Energy Suppliers and (iii) Interest Groups in rural communities in Fiji, Ghana and Nigeria. The responses are analysed to conduct a comparative study across the three countries examined. Based on the above, an attempt is made to present broad base policy pathways for adopting clean cooking services in the rural community for sustainable development. The policy pathways harmonize the major stakeholders in the cooking space: Governments, Non-Governmental Organizations (NGOs), clean energy developers, business services and the end-users. In addition, a business model in the context of a rural community cooking space is proposed, stating that the initial life of the clean cooking business should be government-driven and, thereafter, followed by incentive-driven at the mid-life of the business (say, 25% technology penetration) and private-sector-driven at the late-life (say, 45% technology penetration). It is expected that the effort made in this work could be advanced by investigating the detailed techno-economic parameters of clean cooking technologies that could be influenced by the policy pathways established in connection with the sociocultural factors associated with energy services.

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Policy Pathways for Mapping Clean Energy Access for Cooking in the Global South—A Case for Rural Communities


Purpose
This study aims to decompose financial development into its three key components (depth, access and efficiency) to investigate whether they can help to overturn the negative impact of foreign direct investment (FDI) on the environment.


Design/methodology/approach
The study uses a dynamic panel of 43 economies from 1982 to 2018 and decomposed financial development into its three key components: depth, access and efficiency.


Findings
The results from the various estimations indicate that financial deepening and efficiency reduce environmental risk and can overturn the negative impact of FDI on the environment. In addition, the study finds that low levels of financial access worsen environmental risk but doubling financial access is likely to reduce it which makes the relationship between access and environmental risk non-monotonic. After splitting the data set into high and low financially developed economies, the study reports that FDI is more environmentally depressive among low financially developed economies.


Practical implications
The practical implications are that improvement in financial efficiency guarantees high returns on savings and investment and can reduce environmental risk. So, central governments should invest in financial technologies and formulate financial regulations through monetary and fiscal policies to enhance financial efficiency and depth.


Social implications
If inward FDI to Africa continues the business-as-usual trend, the environmental risk in the region may continue to rise, environmental conditionalities for FDI must be strengthened.


Originality/value
The study uses a comprehensive measure of financial sector development and decomposes financial development indicators to assess their efficacy in mitigating the relationship between FDI and environmental quality.


Eric Boachie Yiadom

Papers

Environmental risk, FDI and tax reforms: why we must worry

Environmental Risk and Foreign Direct Investment: the role of Financial Sector Development

Does Eurobond issuance influence FDI location? Evidence from sub-Saharan Africa

Policy Pathways for Mapping Clean Energy Access for Cooking in the Global South—A Case for Rural Communities

Environmental risk and foreign direct investment: the role of financial deepening, access and efficiency