Does foreign direct investment asymmetrically influence carbon emissions in sub-Saharan Africa? Evidence from nonlinear panel ARDL approach

Abstract While several existing panel studies have focused on the linear effect of foreign direct investment on carbon emissions, nonlinear panel studies on this subject remain thin on the ground. This paper examines the asymmetric effect of foreign direct investment on carbon emissions in 41 selected sub-Saharan African countries spanning from 1996 to 2018. In order to decompose foreign direct investment into positive and negative partial sum and examine possible asymmetric effects of the variables on carbon emissions, we used the nonlinear panel ARDL approach. This method accounts for cross-sectional variances that cause inherent heterogeneity in the slope coefficients. Our results show that carbon emissions respond asymmetrically to changes in foreign direct investment. The results further show that in the long run, a positive shock in foreign direct investment increases carbon emissions while a negative shock lowers them. It is recommended that comprehensive investment policies aimed at encouraging aimed clean technology and environmentally-friendly investments be implemented to ensure environmental sustainability.