Journal
ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH
Volume 29, Issue 16, Pages 23545-23560Publisher
SPRINGER HEIDELBERG
DOI: 10.1007/s11356-021-17288-7
Keywords
China; Government expenditure; Money supply; CO2 emissions; Fiscal policy; Monetary policy
Categories
Funding
- ILMA University under the ILMA Research Publication Grant
Ask authors/readers for more resources
The study found that expansionary fiscal policy in China leads to higher carbon dioxide emissions, while expansionary monetary policy inhibits them. Additionally, the relationship between China's economic growth and carbon dioxide emissions does not follow the Environmental Kuznets Curve hypothesis.
Recently, China has declared its national objective of becoming carbon neutral by 2060. Hence, mitigating carbon dioxide emissions has become an important agenda of the Chinese government. Against this backdrop, this paper aims to evaluate the effectiveness of pursuing expansionary fiscal and monetary policies on China's carbon dioxide emission figures by using annual frequency data from 1980 to 2018. Accordingly, this study considers the levels of government expenditure and broad money supply as fiscal and monetary policy instruments, respectively. Besides accounting for structural break concerns in the data, the findings from the empirical analysis reveal that there are long-run associations between carbon dioxide emissions, economic growth, and fiscal and monetary expansion in China. Moreover, the results also show that in both the short- and long-run expansionary fiscal policy trigger higher carbon dioxide emissions while expansionary monetary policy inhibits the carbon dioxide emission figures of China. Furthermore, the results invalidate the existence of the Environmental Kuznets Curve hypothesis since the relationship between China's economic growth and carbon dioxide emissions is evidenced to portray an N-shape. In line with these findings, it is recommended that China achieve environmentally sustainable economic growth by aligning the national fiscal and monetary policies with the 2060 carbon-neutrality objective.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available