The impact of foreign direct investments and renewable energy consumption on environmental degradation in selected emerging economies: Empirical evidences from the bootstrap ARDL bounds test

Foreign direct investments (FDI) have a feature that increases the widespread use of renewable energy in the host country and, accordingly, encourages new energy-saving technologies, knowledge or new production methods. In this context, FDI has significant effects on environmental degradation. On the other hand, renewable energy sources constitute the main area of interest for studies focused on environmental degradation, as they support energy diversity, efficiency and savings, as well as their functions to prevent environmental degradation. Empirical studies provide rather mixed findings regarding the causes of environmental degradation. This thesis tests the relationship between FDI, renewable energy consumption and environmental degradation in Turkey, China, India, Indonesia and Mexico, which are among the selected emerging economies, in the period 1990-2019 with the help of a bootstrap ARDL bounds test. In this study, the newest bootstrap ARDL bounds test developed by Bertelli et al. (2022) is applied. In empirical analysis, DOLS technique is used to estimate long-term coefficients. While there is no cointegration between the variables in question in Turkey, Indonesia and Mexico, the existence of cointegration is proven in China and India. Long-term estimates reveal that economic growth increases CO2 emissions, while FDI and renewable energy consumption decreases it. These results allow the development of policy recommendations.