A comparative study on the effect of alternative and fossil energy consumption on economic growth and foreign direct investment in selected countries using SUR approach.

Energy plays a vital role in every economy, and it can be considered as a driving force of economic growth. The interrelations of energy with the other variables are also significant. As many developing countries rely on energy consumption, attracting energy-intensive facilities and installations is being satisfied with foreign direct investment (FDI) which can affect environment negatively. Accordingly, FDI can stimulate economic growth and the use of energy through economic growth indirectly affects foreign direct investment. Therefore, the primary purpose of this research is a comparative study on the impact of fossil and alternative energy consumption on foreign direct investment and economic growth. Thereby, we figure out the knowledge and technology transferring via FDI and its effect on economic growth, in which direction should it be, and how it should be managed to cause less environmental pollution. So, this research consists of 14 selected developing countries for 1986-2016. The results, estimated through seemingly unrelated regression (SUR), show that alternative energy and fossil fuels have a positive effect on the GDP with the coefficient values of 0.10 and 0.02, respectively. Still oil rents do not affect economic growth. The same findings have been reached with the FDI, and energy resources amplified the foreign investment on the cost of CO2 emissions. Also, these empirical results can be considered by policymakers to help them in creating the right policies for economic growth, adopting a strategy to use more alternative energy and investing in infrastructure to reduce the burning of fossil fuel.