On the interaction between fiscal policy and CO2 emissions in G7 countries: 1875-2016

Yilanci V., Pata U. K.

JOURNAL OF ENVIRONMENTAL ECONOMICS AND POLICY, cilt.11, sa.2, ss.196-217, 2022 (ESCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 11 Sayı: 2
  • Basım Tarihi: 2022
  • Doi Numarası: 10.1080/21606544.2021.1950575
  • Dergi Adı: JOURNAL OF ENVIRONMENTAL ECONOMICS AND POLICY
  • Derginin Tarandığı İndeksler: Emerging Sources Citation Index (ESCI), Scopus
  • Sayfa Sayıları: ss.196-217
  • Anahtar Kelimeler: Economic growth, frequency domain, government expenditures, CO2 emissions, time-varying causality, ENVIRONMENTAL KUZNETS CURVE, OIL-PRICE SHOCK, GOVERNMENT EXPENDITURE, FINANCIAL DEVELOPMENT, ENERGY-CONSUMPTION, FREQUENCY-DOMAIN, ECONOMIC-GROWTH, GREAT CRASH, HYPOTHESIS, CAUSALITY
  • Çanakkale Onsekiz Mart Üniversitesi Adresli: Evet

Özet

This study examines the impact of fiscal policy and economic growth on CO2 emissions employing a bootstrap causality test in the frequency domain. Analysing a long time series of data from 1875 to 2016 for G7 countries, we mainly aim to investigate the validity of the environmental Kuznets curve (EKC) hypothesis and whether fiscal policy affects the environment. The findings of causality from government expenditures to CO2 emissions are time-varying. However, the causality from economic growth to CO2 emissions follows a stable path and does not change over time in all countries except Canada. Since causal relations follow a consistent line and do not confirm an inverted U-shaped relationship between economic growth and environmental pollution, the EKC hypothesis does not hold in the G7 countries, implying that environmental problems are not automatically solved. The results also suggest that fiscal policy can contribute to climate change mitigation at different points in time.