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FDI, Trade, and Finance: Catalysts for Green Growth in ASEAN-5
Summary
Researchers applied fully modified ordinary least squares (FMOLS) estimation to investigate how foreign direct investment, trade openness, and financial development affect green economic growth across ASEAN-5 countries from 2010 to 2021. Results showed that FDI and financial development have positive effects on green growth while trade openness has a negative impact, with policy implications for promoting environmentally responsible investment and stricter trade-related environmental regulations.
Assuring economic growth and development without neglecting the requirement for environmental sustainability has become the most debatable topic in recent international forums. As a result, researchers and decision-makers are now focusing on green growth instead of traditional economic growth. Several factors that influence green growth have been studied in the literature to date, however, the impact of foreign direct investment, trade openness and financial development is relatively unexplored. Therefore, this study employs a fully modified ordinary least squares (FMOLS) estimator to investigate the impact of foreign direct investment, trade openness, and financial development on green economic growth for ASEAN-5 countries from 2010 to 2021. The empirical results show that foreign direct investment and financial development have a positive impact on green growth, whereas trade openness has a negative impact on green growth. Considering the results, this study recommends that policymakers to encourage environmentally responsible foreign investment to invest in the home nation and enhance financial market competitiveness through domestic and international liberalization and privatization in order to promote green growth. We also suggest that policymakers to strengthen and enforce environmental regulations to prevent environmental degradation brought on by increased trade to support green economic growth.
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