Does monetary policy impact CO2 Emissions? A GVAR analysis

Luccas Assis Attilio (), Joao Ricardo Faria () and Mauro Rodrigues

No 2022_24, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper studies the relationship between monetary policy and CO2 emissions. Our contribution is twofold: (i) we present a stylized dynamic AD-AS model with Global Value Chains (GVC) and carbon emissions to illustrate this relationship, (ii) we estimate the effect of monetary policy on emissions using the GVAR methodology, which explicitly considers the interconnection between regions instead of treating them as isolated economies. We focus on CO2 emissions in four regions: U.S., U.K., Japan and the Eurozone, but we use data from 8 other countries to characterize the international economy. Our results show that a monetary contraction in a country is associated with lower domestic emissions both in the short- and the long-run. Although we do not find evidence of cross-region effects concerning monetary policy, variance decomposition suggests that external factors are relevant to understanding each region's fluctuations in emissions.

Keywords: Pollution; monetary policy; international linkages (search for similar items in EconPapers)
JEL-codes: E43 E52 Q50 (search for similar items in EconPapers)
Date: 2022-12-13
New Economics Papers: this item is included in nep-cba, nep-ene, nep-env and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.repec.eae.fea.usp.br/documentos/Attilio_Faria_Rodrigues_24WP.pdf (application/pdf)

Related works:
Journal Article: Does monetary policy impact CO2 emissions? A GVAR analysis (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spa:wpaper:2022wpecon24

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers, Department of Economics from University of São Paulo (FEA-USP) Contact information at EDIRC.
Bibliographic data for series maintained by Pedro Garcia Duarte ( this e-mail address is bad, please contact ).