4.7 Article

Examining the asymmetric effects of fiscal policy instruments on environmental quality in Asian economies

Journal

ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH
Volume 27, Issue 30, Pages 38287-38299

Publisher

SPRINGER HEIDELBERG
DOI: 10.1007/s11356-020-09859-x

Keywords

Fiscal policy; Environmental pollution; Asymmetric ARDL; Asia economies

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Empirical studies pertaining to the effects of fiscal policy instruments on environmental quality have provided mixed evidence. We consider the asymmetric effects of fiscal policy instruments on environmental quality for the top ten Asian carbon emitters over the period 1981-2018. We go beyond the literature and claim that the effects could be asymmetric. More specifically, we found that a positive shock in government expenditure will worsen environmental quality in Malaysia, UAE, Thailand, Indonesia, Turkey, Iran, India, and China, and improve it in Japan. On the other hand, we found that cutting government expenditure will improve environmental quality in these economies and will worsen only in Japan. Moreover, a higher government income tax revenue uniquely increases the government's spending that increases the carbon emissions in Malaysia, UAE, Thailand, Indonesia, Turkey, Iran, India, and China, and decrease in Japan. The negative shock of government revenue has adverse results on carbon emissions in these economies. However, short-run asymmetric effects translate to long-run effects in most Asian economies.

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