Asymmetric effects of foreign direct investment and globalization on ecological footprint in Indonesia

Abstract

The sustainable development goal seems challenging for governments worldwide, including Indonesia, which has faced an ecological deficit due to rapid economic development and population growth since 1999. The study aims to probe the potential asymmetric effects of foreign direct investment and globalization on ecological footprint in Indonesia from 1971 to 2019, which was ignored by previous studies. By adopting the autoregressive distributed lags (ARDL) and nonlinear autoregressive distributed lags (NARDL) approaches, the results clearly reveal that (i) The positive shock of globalization has a positive and statistically significant impact on the ecological footprint; (ii) the impact of foreign direct investment on the ecological footprint is asymmetric in the long run. Accordingly, the study found that the influence of negative changes in foreign direct investment is larger than positive changes. Based on the findings, the study recommends that the Indonesian government carefully consider the long-term consequences of globalization on the environment and reasonable control of foreign direct investment inflows.