Abstract:

Taking FDI and discharged investment on controlling waste gas, wastewater and industrial residue as research variables, and using methods of Granger causal test of time series analysis and DF/ADF stationariness test, this paper makes a positive study on causal and fluctuant relations between foreign direct investment and environmental regulations.An analytical result shows that there is a certain causal relation between them.The foreign direct investment is a cause of environmental regulations.The environmental regulations in their first and second lag periods do not influence inflows of FDI; however, in their third lag period there are some influences on the FDI inflow.In a long term there is no similar trend to the FDI movement and the environmental regulation action.Their relations and dynamic trends should not be ignored when the government works out policies for investment and environment.

Key words: environmental regulation, foreign direct investment, causality