Influences of foreign direct investment and carbon emission on economic growth in Vietnam

Abstract

Over the course of the previous three decades, Vietnam has seen a phase of economic growth, resulting in the influx of foreign direct investment (FDI). However, it is essential to note that there was an extensive rise in carbon dioxide (CO₂) emissions throughout this period. The objective of this research is to analyze the impact of FDI and CO₂ emissions on Vietnam's economic growth, utilizing time series data from 1990 to 2021. The stationarity of the data was assessed using unit root tests, while an autoregressive distributed lag (ARDL) procedure was utilized to examine the long- and short-run associations between the components. Based on the research outcomes, it is seen that a marginal rise of one percent in both FDI and CO₂ emissions is associated with a corresponding long-term gain of 1.36 percent and 1.11 percent in gross domestic product (GDP). Furthermore, in the short term, these increments yield an increase of 0.61 percent and 0.29 percent in GDP. The conclusions of this study will provide valuable insights for policymakers in crafting policies that effectively promote sustainable development. Specifically, these policies would aim to strike a balance between capital growth derived from foreign investments and economic expansion, while concurrently mitigating carbon emissions.