Economic growth, financial development and the relationship between foreign direct investments and CO2 emissions: The case of Turkey

Throughout history and as a result of various changes in the atmosphere and the earth, the world has experienced climate changes in different periods. These changes have led to an increase in the general temperature of the world from time to time as well as decreases at other times. The changes in climatic temperatures have affected all living things on our planet as well as civilizations. After the Industrial Revolution, and with the growth of industries, there has been a rapid increase in the rates of greenhouse gases in the atmosphere and this has caused global warming. In order to observe the causes and consequences of global warming, this study analyzed CO2 emissions, economic growth, financial development and foreign direct investments in Turkey using annual data for the 1985-2015 period and following the Autoregressive Distributed Latency Model (ARDL) developed by Paseran and Shin. The findings reveal an inverse U relationship between CO2 emissions and economic growth. The existence of the Environmental Kuznet Curve was thus supported for Turkey. A U-relationship was also identified between CO2 emissions and financial development. Foreign direct investments were found to have a positive effect on CO2 emissions in Turkey. Therefore, the Pollution Shelter Hypothesis is valid for Turkey.