Ecological Footprint, Foreign Direct Investment, and Gross Domestic Production: Evidence of Belt & Road Initiative Countries

Abstract

This research is employed to examine the environmental issues embedded in Belt & Road Initiative (BRI), to be more specific: testify which of these hypotheses: Pollution Havens Hypothesis, Pollution Halo Hypothesis, Environmental Kuznets Curve is in accordance with the current development condition of BRI counties; whether there exists a bidirectional relationship among Ecological Footprint, Gross Domestic Production, Foreign Direct Investment (FDI) in Belt & Road Initiative countries. In this paper, Panel Vector Autoregression is utilized to analyze a dataset of 44-member countries in this initiative, ranges from 1990 to 2016, to empirically testify the environmental evaluation of this project. Results are analyzed on both long-run and short-run cases through Orthogonalized Impulse-Response Functions (IRF). This research displays a great heterogeneity among different target variables, FDI as a main variable of interest does not expose a bidirectional relationship with Ecological Footprint, only Ecological Footprint demonstrates robust influence on FDI. In addition, Pollution Havens Hypothesis is certified to be true for FDI and GDP among Belt & Road Initiative member countries.