The impact of FDI on CO2 emission in a small island developing state: A cointegration approach

Sheereen Fauzel


This paper examines the long run and short run impact of FDI (disaggregated into manufacturing and non- manufacturing sector), on CO2 emission in Mauritius. In this study the bounds testing approach to cointegration is used. For instance, the Autoregressive Distributed Lag (ARDL) model is used on time series data over the period 1980 to 2012. The main findings of this study show that foreign investment in the manufacturing sector is harmful for the environment whereas FDI in non-manufacturing sectors does not really affect the environment. Moreover, an increase in growth is as well seen to increase the level of CO2 emission. Energy use in the country also proved to result in an increase in CO2 emission. The findings further confirm the stability of the model for the small island economy of Mauritius.

Full Text:



Amin, S.B., Ferdaus, S.S. and Porna, A.K., 2012. Causal Relationship among Energy Use, CO2 Emissions and Economic Growth in Bangladesh: An Empirical Study. World Journal of Social Sciences, 2(8), pp.273-290.

Blin, M. and Ouattara, B., 2009. Foreign direct investment and economic growth in Mauritius: Evidence from bounds test cointegration. Économie internationale, (1), pp.47-61.

Boopen, S. and Vinesh, S., 2011. On the relationship between CO2 emissions and economic growth: the Mauritian experience. In CSAE 25th anniversary conference (p. 1e25).

Dinda, S. and Coondoo, D., 2006. Income and emission: a panel data-based cointegration analysis. Ecological Economics, 57(2), pp.167-181.

Fauzel S, & Keesoonah L, (2016), “A dynamic investigation of Foreign Direct Investment and Sectoral Growth in Mauritius”, African Journal of Economic and Sustainable Development, Forthcoming

Ferda, H., 2008. An Econometric Study of CO2 Emissions, Energy Consumption, Income and Foreign Trade in Turkey,” a paper presented at the 31st IAEE Annual International Conference. Istanbul (June).

Grimes, P. and Kentor, J., 2015. Exporting the Greenhouse: Foreign Capital Penetration and CO? Emissions 1980 1996. journal of world-systems research, 9(2), pp.261-275.

Harris, R. and Sollis, R., (2003), “Applied Time Series Modeling and Forecasting Wiley, West Sussex.

Hossain, S., 2012. An econometric analysis for CO 2 emissions, energy consumption, economic growth, foreign trade and urbanization of Japan.

Inder, B., 1993. Estimating long-run relationships in economics: a comparison of different approaches. Journal of econometrics, 57(1), pp.53-68.

Pesaran, H. M and B. Pesaran (1997), Working with Microfit 4.0: Interactive Economteric Analysis.

Pesaran, H. Shin, Y. and Smith, R. (2001). ‘Bound testing approaches to the analysis of level relationships’, Journal of Applied Econometrics, 16, 289-326.

Shi, A., 2001, August. Population growth and global carbon dioxide emissions. In IUSSP Conference in Brazil/session-s09.

Yanchun, Y., 2010, December. FDI and China’s Carbon Dioxide Emissions: 1978–2008. In Proceedings of the 7th International Conference on Innovation & Management, Wuhan University of Technology, China.


  • There are currently no refbacks.

ISSN: 2254-4380