Is Pollution Haven Hypothesis Valid in Turkey? New Evidence From Fourier Approach

Abstract Foreign Direct Investment (FDI) inflows, which have increased rapidly in almost every region of the world since the late 1980s, have been the subject of long and contentious debates about the costs and benefits for the host country, especially for developing countries. In this context, this study investigates the impact of FDI on environmental quality in the case of Turkey which is developing country, for the period 1970-2016. For this purpose, unlike existing studies, we use Fourier approach that is capable of capturing gradual or smooth shifts, in our empirical analysis. The findings of empirical analysis indicate that FDI has a positive impact on environmental degradation, so Pollution Haven Hypothesis (PHH) is valid for Turkey. Our results reveal the inverted U-shape or the environmental Kuznets Curve (EKC) relationship between economic growth and CO2 emissions. We also find that energy consumption significantly increases environmental degradation in Turkey.