Abstract:

Purpose: This study investigates the relationship between foreign direct investment, financial development, renewable energy consumption and CO2 emissions which applying to confirm the pollution haven hypothesis for the period of 1971-2018 in Turkey. Design/Methodology: The study employed newly developed Fourier ADL cointegration method, the dynamic ordinary least squares long-run estimator and the Fourier Toda-Yamamoto Granger causality test. Findings: The empirical results of Fourier ADL method confirmed that there is a cointegration relationship between these series in the long run. In addition, the dynamic ordinary least squares results showed that foreign direct investment and financial development led to an increase in CO2 emissions. Renewable energy consumption had no effect on environmental pollution. Foreign direct investment increases CO2 emissions supports the validity of pollution haven hypothesis in Turkey. However, renewable energy consumption was not at a desirable level to reduce environmental pollution. Finally, the Toda-Yamamoto and Fourier Toda-Yamamoto Granger causality tests were used to determine the causality relationship between the series. According to the causality test results; It has been determined that there is a bidirectional causality relationship between foreign direct investment and CO2 emission, and a unidirectional causality relationship from financial development to CO2 emission. Limitations: In this study, only CO2 emission was used as an environmental pollution indicator. Originality/Value: Foreign direct investment and renewable energy consumption have not been analyzed together in studies conducted in Turkey. In addition, the newly developed Fourier ADL cointegration and Toda-Yamamoto Granger causality methods have not been used in pollution haven hypothesis analysis. It is believed that this study will contribute to the literature in this way.

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