Is the Pollution Haven Hypothesis (PHH) Valid for Turkey?
The relationship between FDI inflows and carbon dioxide (CO2) emissions is still one of the most important topics among both environmentalists and economists. In this study, the Toda-Yamamoto-augmented Granger causality method is applied to analyze the relationship between FDI inflows and CO2 emissions by employing annual data from 1974 to 2011 to determine whether the pollution haven hypothesis is valid in Turkey. The results of the causality test indicated that FDI inflows and CO2 emissions have a short-run univariate causal relationship, with positive causality moving from CO2 emissions to FDI inflows. One direction effect of CO2 emissions on FDI inflows supports the pollution haven hypothesis in Turkey.
Key words: FDI Inflows, CO2 Emissions, TY-VAR Causality, Turkey.
JEL: O10, F13, Q56, C22.