Foreign direct investment, pollution and economic growth: evidence from Malaysia

The bounds test developed by Pesaran et al. (2001 Pesaran, H, Shin, Y and Smith, RJ. 2001. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16: 289–326. [Crossref], [Web of Science ®] , [Google Scholar]) is applied to examine the existence of a long-run relationship between foreign direct investment (FDI) inflows, pollution and output of Malaysia. Granger causality tests are also utilized to test for the presence of the short-run and long-run causal relationship between these variables. Both FDI inflows and pollution have short-run causal relationship on output. Output only has long-run causal relationship on FDI inflows.

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