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This paper aims to investigate the causal nexus between foreign direct investment (FDI) and economic growth in SAARC countries.

Johansen's cointegration test was employed to examine the long‐run relationship between foreign direct investment and economic growth in SAARC countries. Besides, the vector error correction model (VECM) was employed to examine the causal nexus between foreign direct investment and economic growth in SAARC countries for the years 1970‐2007. Finally, the impulse response function (IRF) has been employed to investigate the time paths of log of foreign direct investment (LFDI) in response to one‐unit shock to the log of gross domestic product (LGDP) and vice versa.

The Johansen cointegration result establishes a long‐run relationship between foreign direct investment and gross domestic product (GDP) for the sample of SAARC nations, namely, Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The empirical results of the vector error correction model exhibit a long‐run bidirectional causal link between GDP and FDI for the selected SAARC nations except India. The test results show that there is a one‐way long‐run causal link from GDP to FDI for India.

This paper employed annual data to examine the causal nexus between FDI and economic growth. Therefore, researchers are encouraged to test the FDI‐growth relationship further by using quarterly data.

The SAARC nations should adopt effective policy measures that would substantially enlarge and diversify their economic base, improve local skills and build up a stock of human capital recourses capabilities, enhance economic stability and liberalise their market in order to attract as well as benefit from long‐term FDI inflows.

This paper would be immensely helpful to the policy makers of SAARC countries to plan their FDI policies in a way that would enhance growth and development of their respective economies.

The main purpose of this paper is to empirically investigate the effect of macroeconomic uncertainty on environmental degradation in India over the period 1971–2016. Additionally, this paper considers the role of financial development, energy consumption intensity and economic growth in explaining the variation of environmental degradation in India.

The authors applied the power generalized autoregressive conditional heteroskedasticity model to measure inflation volatility and used it as a proxy for macroeconomic uncertainty. From a methodological perspective, the authors employ the autoregressive distributive lag bound testing model to establish the long-run equilibrium association between the variables. The Toda–Yamamoto causality approach has been used to examine the direction of causality between the variables.

Findings suggest that macroeconomic uncertainty exerts a positive effect on carbon emissions, indicating that higher inflation volatility, as a proxy for macroeconomic uncertainty, hinders India's environmental quality. Financial development, economic growth and energy consumption intensity have also adversely impacted environmental quality.

The negative association between macroeconomic uncertainty and environmental degradation calls for some stringent policy actions. While formulating policies to promote growth and maintain stability, policymakers and government stakeholders should take into account the environmental effects of macroeconomic policies. There is a need to implement more environmental-friendly technologies in the financial sector that could reduce carbon emission.

To the best of the authors' knowledge, this study is the first that considers the role of macroeconomic uncertainty along with financial development and energy intensity in an emerging economy like India.