The Dynamic Links Between Environmental Quality, Foreign Direct Investment, and Economic Growth in the Middle Eastern and North African Countries (MENA Region)

This paper investigates the relationship between foreign direct investment (FDI) inflows, economic growth, and environmental degradation. This is also the case for Middle Eastern and North African countries; we outline a dynamic simultaneous equations model over the period of 1990-2012 using the GMM approach. Our results indicate that there is evidence of bidirectional causal relationship between economic growth and FDI inflows, between economic growth and CO2 emissions, and between FDI inflows and CO2 emissions for the global panel and Middle East, with the exception of the North Africa. The existence of unidirectional causality exists from FDI inflows to CO2 emission. The study suggests that environmental and foreign policies promote economic growth in an environment without pollution and with a strong investment at the same time.