The Impact of Environmental Regulations on Foreign Direct Investment: Evidence from an Emerging Economy

The study investigated the impact of environmental regulations on foreign direct investment: Evidence from an emerging economy. Data from 2005 to 2023 was employed in the study. The Granger causality and ordinary least square (OLS) technique, was used to estimate the data. The finding showed that environmental regulation granger cause foreign direct investment, but foreign direct investment does not environmental regulation. There is a bi-directional causal relationship between carbon emission and FDI. It is observed that GDP granger cause FDI but FDI does not granger cause GDP. Also, environmental regulation impact FDI negatively and statistically insignificant. A negative insignificant relationship between carbon emissions and FDI is observed. A negative and significant relationship exist between GDP and FDI. Based on the findings from the study, the following recommendations are made; policymakers should focus on improving the regulatory environment in ways that encourage sustainable development, policymakers should consider improving factors like infrastructure, human capital, and business environment to offset the negative relationship between GDP and FDI in order to attract more foreign investments.