Arab countries, like many emerging economies, are facing many challenges in achieving Sustainable Development Goals (SDGs). This study is the first to examine the dynamic relationships among four key factors in achieving those goals, i.e. economic growth, foreign direct investment (FDI), governance, and environmental quality, across 11 Arab countries over the period 2002–2019.
To uncover how the variables interact over time, the study employs a PVAR-GMM approach developed by Abrigo and Love (2016), which enables a simultaneous examination of their interconnected dynamics and causal structure.
The results indicate that FDI positively affects economic growth, while both environmental degradation and stronger governance tend to attract additional FDI. The findings also show that economic growth and FDI intensify environmental degradation, whereas improved governance mitigates it. The analysis indicates that most variables exhibit a bidirectional causality, except the growth–FDI link. Finally, impulse response functions show that shocks generally disappear within four to six years, and variance decomposition indicates that each variable is primarily driven by its own innovations.
This study contributes to the sustainability literature by empirically testing the importance of a set of factors for achieving the SDGs in the Arab region, a region that remains underexamined. By applying a methodology accounting for dynamic, endogenous and multidirectional relationships, it provides fresh insights into the complex pathways through which both resource-rich and resource-scarce economies pursue sustainable development.
