Causal interaction between economic growth, FDI, trade liberalization and CO₂ emission in Morocco: case study of Morocco with VECM evidence Available to Purchase

Morocco has experienced a significant economic growth over the past decades, driven by strategic reforms that have allowed it to gain in competitiveness as an attractive destination for foreign direct investment (FDI). However, this economic progress has been accompanied with rising carbon dioxide emissions (CO2 emissions), posing major environmental challenges. This article aims to examine the relevance of the EKC (Environmental Kuznets Curve) in Morocco, examining the interaction between foreign direct investment, trade liberalization, economic growth and CO₂ emissions while highlighting the Moroccan environmental policy in preventing and reducing climate change risks.

This study adopted both qualitative and quantitative methods, using the explorative approach to overview the environmental Moroccan context, and an empirical analyse of gross domestic product (GDP), foreign direct investment (FDI), trade % of GDP (trade liberalization), exportations and CO₂ emissions variables, using annual data for over 30 years that cover the period of 1991–2021.

The results of empirical analysis argue that FDI, trade and exportation have a significant effect on economic growth in both the short and long term. In the long term, there is a bi-directional causality between CO₂ emissions, trade and FDI, while a unidirectional causality runs from CO₂ to exportation. Furthermore, the CO₂ emissions are influenced by FDI (20.25%) and trade (23.35%) in the long term, confirming the environmental Kuznets Curve (EKC) hypothesis. The findings conclude that the efforts deployed by the Moroccan government in attracting FDI, increasing trade and boosting exportation, should be aligned with the environmental concerns.

The key contribution of this study, compared to previous studies, lies in the use of trade liberalization and exportation variables as factors that could impact the environment pollution in Morocco. This analysis enhances the originality and value of our findings, given the lack of examination of these variables during this period in the existent literature.