The Impact of Foreign Direct Investment and Economic Growth on Carbon Dioxide Emissions: The Case of Türkiye

Abstract

Purpose – The primary objective of this study is to examine the impact of foreign direct investment and economic development on carbon dioxide emissions. The increase in the capacity of foreign direct investment and the acceleration of economic development have led to significant growth in the production sectors, particularly in industry and energy production. These developments play a decisive role in the dynamics of changes in carbon dioxide (CO₂) emissions.
Design/methodology/approach – The study is based on the analysis of Türkiye’s data for the period 1970–2023 using the Bayesian approach and the Autoregressive Distributed Lag (ARDL) method. In the Bayesian approach, Bayesian multiple linear regression analysis with uncertain prior information was conducted using the WinBUGS program, generating 2000000 samples. The ARDL bounds testing approach was employed to determine the short- and long-run effects of the variables and to provide a comparative evaluation.
Results – The ARDL analysis indicates the presence of a long-run cointegration relationship among the variables and shows that economic growth exerts an increasing effect on carbon emissions in the short run. The Bayesian regression results, on the other hand, suggest that the coefficients of the variables generally exhibit a positive tendency and that the model estimates are stable. This finding shows that foreign direct investments and economic development have an important effect on environmental sustainability in Turkey.
Discussion – The research findings reveal a significant link between economic growth, foreign direct investments, and carbon dioxide emissions in Turkey. This situation highlights the necessity of considering environmental impacts in the economic development and foreign direct investment process and integrating the principle of sustainability into policies.