LAUSR

Abstract This paper stains to investigate the causality between Foreign Direct Investment (FDI), Carbon dioxide emission (CO2) and poverty using simultaneous-equations models (SEM's) for a global panel of 98 developing countries over the period 1995–2017. We also implement these empirical models for three regions sub-panels: Asia, Africa and Latin America. Global panel results showed that there is a bi-directional causal relationship between FDI and poverty as well as CO2 emission and poverty. However, there is unidirectional causal relationship that runs from FDI to CO2 emission. Findings showed also a significant negative relationship between FDI and poverty for all groups of countries with the exception of the African panel. Other important results showed a negative impact of FDI on CO2 emission in African countries, an inverted U-shaped relationship between the two variables for Asian economies and a positive effect of FDI on environmental quality in Latin America.