Linking trade, innovation, and foreign direct investment with a dynamic ARDL simulation model to examine environmental deterioration in India

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Prashant Bahl, Virender Kumar, Divya Tuteja

Abstract

The aim of this study is to ascertain how India's environmental degradation is affected by innovation, trade, economic growth, FDI, energy consumption, and urbanisation. The dynamic autoregressive distributed lag model (ARDL) will be used in this study to examine how the independent variables actually change and how that change affects the dependent variable. In addition to having a positive impact on sustainability, the environment, and the impact of climate change, research on the relationship between trade, FDI inflow, and innovation in environmental degradation research can also help achieve Sustainable Development Goal (SDG) 13, which calls for "Taking urgent action to combat climate change and its impacts." To further aid in the ongoing efforts to address the issue of environmental degradation and achieve SDG 13, this research may offer fresh perspectives on how policies can be used to encourage innovation in environmental degradation research and lessen the adverse effects of climate change. The results indicate that energy consumption, GDP growth and urbanisation have a positive impact on carbon emissions in the short term. Conversely, the results suggest that over a prolonged period, only increase in trade had a negative effect on emissions. Urbanisation has a significant and positive effect on long-term carbon dioxide emissions. It has been observed that Foreign direct investment (FDI) has positive effect on short-term and long-term carbon dioxide emissions. Furthermore, innovation has a positive impact on carbon emissions in both the long and short term.

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How to Cite
Prashant Bahl, Virender Kumar, Divya Tuteja. (2025). Linking trade, innovation, and foreign direct investment with a dynamic ARDL simulation model to examine environmental deterioration in India. European Economic Letters (EEL), 15(1), 515–527. https://doi.org/10.52783/eel.v15i1.2429
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