FDI, Economic Growth, Energy Consumption & Environmental Nexus in Bangladesh

Abstract

This paper attempts to investigate the relationship among economic growth, energy consumption, CO2 emission, FDI and natural gas usage in Bangladesh through co-integration and Vector Error Correction model (VECM) over the period 1978 to 2010. Using ADP unit root tests it is found that all the four variables are integrated in first difference. The Johansen co-integration tests indicate that there is existence of long-run relationship among the variables. The VECM long run causality model indicates that there is a long run causality running from energy consumption and natural gas usage by industrial sector to GDP as well as from CO2 emission to FDI. Likewise in the short run a causal relationships have also been found among the variables. Moreover our model is found be error free based on several statistical test. Our results provide important policy suggestions regarding our foreign direct investment, environmental issues and economic growth nexus in Bangladesh.