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Carbon Dioxide and Greenhouse Gas Emissions: The Role of Monetary Policy, Fiscal Policy, and Institutional Quality

Konstantinos Bletsas (), Georgios Oikonomou (), Minas Panagiotidis () and Eleftherios Spyromitros ()
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Konstantinos Bletsas: Department of Economics, University Campus, Democritus University of Thrace, 69100 Komotini, Greece
Georgios Oikonomou: Department of Economics, University Campus, Democritus University of Thrace, 69100 Komotini, Greece
Minas Panagiotidis: Department of Economics, University Campus, Democritus University of Thrace, 69100 Komotini, Greece
Eleftherios Spyromitros: Department of Economics, University Campus, Democritus University of Thrace, 69100 Komotini, Greece

Energies, 2022, vol. 15, issue 13, 1-24

Abstract: Environmental control remains a salient aspect of states’ policies in the present decade. To reduce emissions, governments and central banks tend to adopt various strategies. The present research quantifies the nexus between fiscal and monetary policy, institutions’ quality, central bank characteristics, and carbon dioxide and greenhouse gas emissions. Data has been sourced from 95 countries during the period from 1998 to 2019. According to the empirical results, the main determinants of gas emissions in developing countries are economic growth, government expenses, and central bank independence, whereas, in developed countries, they are economic growth, government efficiency, and central bank transparency and independence. Economic growth is a significant deteriorating factor in the state of the environment. By contrast, institutional and bureaucratic quality, measured through government effectiveness and expansionary fiscal policies as well as central bank independence and transparency, are ameliorating factors, as they decrease emissions. To conclude, governments must first reduce control over central banks and target government spending on the energy transition.

Keywords: fiscal policy; monetary policy; institutional quality; central bank independence; CO 2 emissions; GHG emissions (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
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