FDI and Pollution: A Granger Causality Test using Panel Data

Nottingham University Business School
Journal of International Development (Impact Factor: 0.88). 04/2005; 17(3). DOI: 10.1002/jid.1196
Source: RePEc

ABSTRACT This study reports the findings of Granger causality tests on the relationship between FDI and pollution across 112 countries over 15-28 years. Our results uncover alternative causality relationships between the two variables depending on a host country's level of development.

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    • "In this type of studies, the evidence of a pollution haven a¤ect is quasi non-existent (Ratnayake and Widewald (1998), Smarzynska and Wei (2001), Eskeland and Harrison (2003), Mihci et al. (2005), Koop and Tole (2008)), although recent studies …nd a signi…cant PHE (Sparatenu (2007), Dam and Scholtens (2008)). In order to validate the pollution haven e¤ect, Ho¤mann et al. (2005) study whether FDI / pollution Granger cause pollution / FDI using new techniques in Granger causality with short time series and panel data. Their results suggest that a pollution haven e¤ect is more likely to happen in low-income host countries. "
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    ABSTRACT: This paper investigates if differences in environmental regulations can influence FDI flows in a multi-country setting taking into account the so-called "third-country" effects. We examine bilateral FDI flows using a new extended OECD investment database which covers great number of host countries and a long sample period (1981-2005). The findings based on a spatial gravity-like model are largely plausible across specifications and confirm the existence of a negative relationship between FDI and environmental stringency, once we correct for endogeneity and spatial dependence. The evidence of a positive "third-country" effect for FDI suggests the prevalence of complex FDI from developed to developing countries. The spatial structure of the model allows also to underline the possible existence of competition in environmental standards between countries to attract FDI.
    SSRN Electronic Journal 05/2008; DOI:10.2139/ssrn.1292705
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    • "Because of its suitability to our data sets, in which we have a short panel in time with a large number of cross-section units, we apply the approach proposed by Hurlin and Venet (2001), Hurlin (2004a, 2004b), used for example by Hoffman et al. (2005); Hansen and Rand (2004) or Erdil and Yetkiner (2009), treating the autoregressive coefficients and regression coefficient slopes as constants in time, but different across countries. In short panels, the fixed effects (FE) estimator of the coefficients of lagged endogenous variables is biased and inconsistent (Nickell 1981). "
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    ABSTRACT: To test potential bilateral causalities relation between HIV-AIDS mortality and GDP, we propose a simple Granger noncausality test for heterogeneous panel data models. 44 African countries are selected for annual pooled data from 1990 to 2009. Results are presented for the heterogeneous noncausality hypothesis (HENC), which tests, for each cross-section unit, the nullity of all the coefficients of the lagged explanatory variable. Bilateral causality relation is observed for 5 countries out of 44 (11% of the countries in our data set). We have 18 countries of unidirectional causality, which 14 are from HIV mortality rate to GDP (43% from total), and 4 are from GDP to HIV mortality rate (9% from total). These results alert for the risk of epidemic trap, initiated first by the deleterious effect of HIV-Aids on countries income.
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    • "Research on foreign direct investment (FDI) has attracted much attention of scholars in the fields of international business and economics in recent years (Neven and Siotis, 1996; Barry and Bradley, 1997; Glass and Saggi, 1999; Mortimore, 2000; Hunya, 2002; Girma et al., 2005; Egger and Pfaffermayr, 2005; Hosseimi, 2005; Thurbon and Weiss, 2006; Marin and Bell, 2006; Kosack and Tobin, 2006; Xing and Wan, 2006; Ishii, 2006; Herrmann and Datta, 2006; Bitzenis, 2006; Das and Pant, 2006; Hoffmann et al., 2006). FDI is defined as the flow of capital from a foreign country to a host country to establish production or service facilities and to conduct business activities (Park, 2003). "
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    ABSTRACT: A chaotic system describing the FDI in China is investigated. Two-dimensional map of the system has been controlled by the use of time delay feedback method. Our numerical simulation results have indicated that the FDI chaos in China can be controlled by the intervention of the government. The intervention (or control force) cannot be too big, otherwise the control process has no economic significance. The factors affecting FDI are also discussed in the paper.
    Research in International Business and Finance 01/2008; 22(1-22):17-28. DOI:10.1016/j.ribaf.2006.11.001
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Robert Hoffmann