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The Impact of Financial Development, Foreign Direct Investment, and Trade Openness on Carbon Dioxide Emissions in Jordan: An ARDL and VECM Analysis Approach

Author

Listed:
  • Jamal Alnsour

    (Department of Project Planning & Management, the Faculty of Business, Al-Balqa Applied University, Al-Salt 19117, Jordan)

  • Abdullah Radwan Arabeyyat

    (Department of Project Planning & Management, the Faculty of Business, Al-Balqa Applied University, Al-Salt 19117, Jordan)

  • Ahmad Jamal Alnsour

    (BLOM Bank, Amman P.O. Box 930312, Jordan)

  • Nashat Ali Almasria

    (Business Faculty, A’Sharqiyah University, Ibra 400, Oman)

Abstract

Jordan has made substantial strides in enhancing its economy by focusing on economic growth stimulants, which include financial development, foreign direct investment (FDI), and trade openness. However, these economic activities often lead to significant environmental risks. Despite their relevance, the existing literature has rarely examined the influence of these dynamics on environmental quality in the Middle East, particularly in Jordan. This study aims to investigate the influence of financial development, FDI, and trade openness on carbon dioxide (CO 2 ) emissions in Jordan. To achieve this, the study employs the Autoregressive Distributed Lag (ARDL) technique and the Vector Error Correction Model (VECM) Granger causality approach, utilizing data sourced from the World Bank for the period from 1990 to 2022. The findings indicate that financial development, FDI, and trade openness positively impact CO 2 emissions, thereby increasing environmental risks in both the short and long term. Additionally, there exists a bidirectional causal relationship between financial development and both FDI and trade openness, as well as between FDI and trade openness. It is imperative for Jordan to design strategies that balance economic growth with sustainable environmental practices.

Suggested Citation

  • Jamal Alnsour & Abdullah Radwan Arabeyyat & Ahmad Jamal Alnsour & Nashat Ali Almasria, 2024. "The Impact of Financial Development, Foreign Direct Investment, and Trade Openness on Carbon Dioxide Emissions in Jordan: An ARDL and VECM Analysis Approach," JRFM, MDPI, vol. 17(11), pages 1-20, October.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:11:p:490-:d:1510926
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    References listed on IDEAS

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    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
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