Foreign direct investment, stock market capitalization, and sustainable development: relative impacts of domestic and foreign capital

Abstract

It is well acknowledged that achieving sustainable development goals without negatively impacting a country’s economic activity is complicated. The question of whether foreign or domestic capital can be used to address the financial demands of the nations who lack the financial resources for a green transformation should now be resolved. Based on this, the main goal of this research is to analyze the impacts of domestic and foreign capital on carbon emissions for a heterogeneous panel of 42 countries for the period from 1990 to 2017. Aside from capital accumulation, the environmental impact of elements such as economic growth, urbanization, trade openness, and energy usage is also studied. The newly developed quantile via moment approach is utilized to isolate the impacts according to the countries’ emission levels. Finally, the impact of these variables on the recently constructed sustainable development index is investigated in order to ensure its robustness. The findings of the study reveal that the environmental efficiency of domestic capital accumulation in countries with low emission levels is higher than in countries with high emission levels. Foreign capital, on the other hand, has no substantial effect on emission levels in all quantiles. © 2022, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.