Foreign Direct Investment and Renewable Energy Consumption in European and Central Asia Nations: The Moderating Role of Government Expenditure

Abstract

Our study contributes to the growing literature on the 7th and 8th Sustainable Development Goals because it examines the moderating role of government spending in developing renewable energy consumption by attracting higher net FDI inflows. We use a dynamic system Generalized Method of Moments to analyze unbalanced panel data with 939 annual observations from 45 European and Central Asia countries from 2000 to 2019. While increasing the net FDI inflows discourages renewable energy consumption, higher government spending positively empowers renewable energy consumption. Moreover, the results find that government spending moderates the nexus between net FDI inflows and renewable energy consumption in European and Central Asian countries. The findings support the pollution haven hypothesis, public economics, and institutional theories. Finally, the findings support policymakers in Europe, Central Asia, and other emerging nations to encourage sustainable renewable energy utilization.