Asymmetric Effects of Financial Development, Energy Consumption, and Foreign Direct Investment on Carbon Dioxide Emission in Vietnam

This study investigates the asymmetric effects of financial development, energy consumption, and foreign direct investment on carbon dioxide emissions in Vietnam from 1990 to 2021 by employing a nonlinear autoregressive distributed lag. The findings reveal complex and asymmetric relationships in both the short and long term. In the long term, carbon dioxide increases with positive shocks in financial and economic growth, and negative shocks in energy consumption. Conversely, these emissions decrease with negative shocks in financial development and positive shocks in foreign direct investment. Short-term results also show that financial development significantly promotes carbon emissions. Although energy consumption shocks initially reduce these emissions, they later increase them. Notably, positive foreign direct investment shocks were found to reduce carbon dioxide emissions in the short term. These findings emphasise the need for policies that balance economic development, energy use, foreign investment attraction, and environmental protection in a developing economy.