Unveiling Sectoral Foreign Investment, Economic Expansion, and Environmental Degradation Interplay in a Developing Economy

Abstract

This study explores significant costs, such as environmental degradation, and rewards, such as GDP growth, accompanying sectoral foreign investment in Pakistan from 2001 to 2023. The study uses the autoregressive distributed lag (ARDL) model to evaluate the interplay between sectoral foreign investment inflows such as agriculture, mining, and manufacturing sectors on carbon dioxide (CO2) emissions. Additionally, the model is employed to estimate the interplay between sectoral foreign investment and economic expansion. The findings reveal that the influx of foreign investment in the agriculture, mining, and manufacturing sectors reduces CO2 emissions in Pakistan. The influx of foreign investment in the agriculture, mining, and manufacturing sectors has boosted economic expansion in Pakistan. Hence, it is advisable to permit foreign direct investment in the agriculture, mining, and manufacturing sectors only if it satisfies the environmental considerations.

Keywords: Foreign investment, Economic expansion, environment, ARDL, Pakistan