Dynamic connection between inward foreign direct investment, renewable energy, economic growth and carbon emission in China: evidence from partial and multiple wavelet coherence

This paper presents a fresh understanding of the vigorous connection between inward FDI, renewable energy consumption, economic growth and carbon emission in the Chinese economy employing novel Morlet wavelet analysis. Wavelet correlation, continuous wavelet transform and partial and the multiple wavelet coherence analyses are applied on variables under study for data acquired during the period 1979 to 2017. The outcome of these analyses reveals that the connections among the variables progress over frequency and time. From the frequency domain point of view, the current study discovers noteworthy wavelet coherence and robust lead and lag linkages, although time domain reveals inconsistent associations among the considered variables. The wavelet analysis according to economic point of view supports that inward foreign direct investment (FDI) and renewable energy consumption help to enhance economic condition in Chinese economy. The results also suggested that inward FDI enhances the environmental degradation in medium and long run in China. The results emphasize the significance of having organized strategies by the policymakers to cope with huge environmental degradation occurred for a couple of decades in China.