Investigating the causality links between environmental quality, foreign direct investment and economic growth in MENA countries

This paper investigates the causal relationship between environmental quality, Foreign Direct Investment and economic growth using simultaneous-equation panel data VAR model a panel of 17 MENA countries over the period 1990-2012. Our empirical results pointed out that there is a unidirectional causality running from both FDI stocks and CO2 emissions to economic growth. They also indicate the existence of unidirectional causality running from economic growth to CO2 emissions. However, the results support the occurrence of unidirectional causality from FDI stocks to CO2 emissions. Our empirical result confirms the hypothesis of neutrality for the Environment-GDP link. There is bidirectional causality from CO2emissions and economic growth, and a bidirectional causal relationship between FDI stocks and CO2 emissions. For the global panel, we show that the existence of a unidirectional causality running from FDI stocks to economic growth; a bidirectional causality between economic growth and CO2 emissions; as well as a bidirectional causality between FDI stocks and CO2emissions.