Investigating The Environmental Quality–Economic Growth Nexus In Vietnam: Nonlinear And Asymmetric Evidence From NARDL And QQR Approaches

Abstract

Vietnam is facing worsening environmental pollution as its economy grows rapidly. This situation creates an urgent need to better understand the link between development and emissions. This study analysises nonlinear and asymmetric relationship between economic growth and environmental quality in Vietnam from 1987 to 2023. Two methods are used: the Nonlinear Autoregressive Distributed Lag (NARDL) model and the Quantile-on-Quantile Regression (QQR). The carbon intensity of GDP is used as the dependent variable. Key influencing factors include the GDP, renewable energy, and foreign direct investment (FDI), which is divided into positive (FDI⁺) and negative (FDI^-) flows. The results confirm the Environmental Kuznets Curve (EKC) hypothesis. GDP squared has a statistically significant negative effect, and the QQR surface shows a clear inverted-U shape. Renewable energy helps reduce CO₂ emissions in both the short run and the long run, especially at higher quantiles. FDI has asymmetric effects: FDI⁺ reduces emissions, while FDI^- brings no clear benefit. The QQR results clearly show that the effects of economic growth, renewable energy, and FDI on emissions depend on specific economic and environmental contexts. In other words, the relationship is not fixed—it varies across different levels of development and pollution. This study contributes to EKC theory by combining two advanced methods to explore how each factor affects emissions across different levels. Based on the findings, the study recommends key policy directions: expand renewable energy, apply higher environmental standards in FDI approval, and promote green growth toward Vietnam’s 2050 net-zero goal.