The link between GDP, FDI, inflation, trade openness, CO2 emissions, and renewable energy in the Czech Republic: New evidence from the ARDL method

This study examines the dynamic relationship between economic growth (GDP), foreign direct investment (FDI), inflation (INF), trade openness (TOO), carbon dioxide (CO 2 ) emissions, and renewable energy (RE) consumption in the Czech Republic from 1990 to 2023. Using the Autoregressive Distributed Lag (ARDL) bounds testing approach, the results confirm a stable long-run cointegration among the variables. Empirical evidence reveals that GDP growth positively influences CO 2 emissions in the short run but promotes RE utilization in the long run. FDI inflows significantly enhance GDP yet contribute marginally to environmental degradation (EDE), while TOO stimulates growth and RE adoption. INF negatively affects FDI and RE investment, indicating the adverse role of macroeconomic instability in sustainability transitions. The estimated error correction term (–0.62) demonstrates a rapid speed of adjustment toward the long-run equilibrium. Diagnostic and stability tests confirm model robustness and the absence of specification errors. Overall, the findings suggest that integrating investment, trade, and environmental policies is essential for achieving green growth in the Czech Republic. Policymakers are urged to promote environmentally responsible FDI, maintain price stability, and expand RE infrastructure to align with the EU Green Deal objectives.