The impact of u.s. monetary policy on carbon emissions: evidence from a TVP-VAR model with stochastic volatility

Sanjay Singh ()
Additional contact information
Sanjay Singh: Harrisburg University of Science and Technology

Economics Bulletin, 2025, vol. 45, issue 1, 458 - 472

Abstract: This study investigates the impact of U.S. monetary policy on carbon emissions using a Time-Varying Parameter Vector Autoregression (TVP-VAR) model with stochastic volatility, applied to quarterly data from 1973:Q1 to 2024:Q4. The findings indicate that a one percentage point increase in the interest rate leads to a reduction in emissions of 27.73 million metric tons (MMT) in 2001:Q1, 25.55 MMT in 2007:Q4, and 18.18 MMT in 2019:Q4, demonstrating a declining effect of monetary policy on emissions over time. These results highlight the evolving nature of monetary transmission and suggest that structural changes in the economy have weakened the environmental channel through which interest rate policy influences carbon outcomes. The study offers new insights for central banks seeking to align macroeconomic and climate goals.

Keywords: TVP-VAR with stochastic volatility; monetary policy; and carbon emissions (search for similar items in EconPapers)
JEL-codes: C3 E5 (search for similar items in EconPapers)
Date: 2025-03-30
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2025/Volume45/EB-25-V45-I1-P41.pdf (application/pdf)

Related works:
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:ebl:ecbull:eb-24-00317

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().