Impacts of economic indicators on environmental degradation: Evidence from MENA countries

During the last two decades, the relationship between macroeconomic variables and environmental pollution has been studied extensively. Moreover, the Environmental Kuznets Curve (EKC) hypothesis and the Pollution Haven Hypothesis (PHH) have been tested in numerous countries. However, the number of empirical studies focusing on testing these two hypotheses for MENA (Middle East and North Africa) countries is limited and cross-sectional and/or time series methods were mainly utilized while the number of studies using panel econometric methodology is quite scant. By using balanced panel data methodology, this study aims to investigate the links and direction of causality between per capita income, foreign direct investment, energy use and carbon dioxide emission for MENA countries for the period of 1980-2013. This study finds partial support for both the EKC and the PHH for MENA countries. Furthermore, the empirical results show that foreign direct investment inflows and energy use have exacerbated pollution in the majority of MENA countries.