Pathway to Oman's environmental sustainability: does trade openness and foreign direct investment matter?

Purpose The study investigates the obscure interaction between trade openness, financial development (FD), economic growth, non-renewable energy use, foreign direct investment (FDI) and environmental sustainability in Oman. Design/methodology/approach The study analyses annual time series data from 1973 to 2021, sourced from the World Bank Indicator and Global Footprint Network. It uses the Augmented Dickey–Fuller and Phillips–Perron tests to check variable stationarity and the autoregressive distributed lag (ARDL) bound cointegration technique to assess long-run relationships. The ARDL model examines dynamic linkages between the dependent and explanatory variables, while the robustness of the results is verified using the fully modified ordinary least squares method. Findings The study finds that FDI enhances Oman's environmental quality in both the short and long run, supporting the pollution halo hypothesis in Oman's case. Economic growth and unclean energy usage increase the ecological footprint (EF) in both the long run and the short run. Moreover, while trade openness reduces the EF in the short run, it leads to environmental degradation in the long run in Oman. Originality/value This study adopts the alternative encompassing measurement for environmental quality (EF) to determine the dynamic association between FDI, FD, trade, economic growth and unclean energy use and environmental quality simultaneously in the context of Oman, thus providing improved findings to inform insightful policymaking. The literature review revealed a lack of research, especially for Gulf countries, including Oman. Thus, this study is needed.