Does Foreign Direct Investment Matter for Environmental Degradation? Empirical Evidence from Central–Eastern European Countries

This study investigates the foreign direct investment (FDI) impact on the environmental quality of Central and Eastern European (CEE) countries, examining relevant hypotheses over the period 1995–2014. First- and second-generation panel econometric techniques are applied to identify a possible non-linear relationship between FDI and environmental degradation through the examination of the dynamic linkages between FDI, economic growth, energy consumption, and CO2 emissions. The results show that FDI has a non-linear impact on the environmental quality of CEE countries which follows the formation of an inverted U-shaped curve. Although increases in energy consumption result in environmental degradation, the economic growth of CEE countries has a positive effect on their environmental performance as a result of their sustainable development. The empirical findings provide policy implications concerning the implementation of environmental and energy policies related to FDI inflows and sustainable development in the CEE region.