The Influence of FDI on Energy Consumption in Developing and Developed Countries: A Dynamic Panel Data Approach

Although FDI is a source of financing in both developed and developing countries, it is also known as a source of innovation thatcould reduce the demand for energy. Thus, recent studies have started to focus on isolating the effect of FDI on energy consumption in thehost country. However, the debate so far is inconclusive. The main objective of this study is to measure the effect of FDI on renewable andnon-renewable energy consumption in 85 developed and developing countries from 2002 to 2014, employing a dynamic panel data method.The study demonstrated that FDI reduces energy consumption in developed countries but has no effect on energy consumption in developingcountries. The study confirmed that the openness index and energy prices also explain energy consumption within developed countries.