Role of monetary policy on CO2 emissions in India

Siddhartha Pradeep ()
Additional contact information
Siddhartha Pradeep: London School of Economics and Political Science

SN Business & Economics, 2022, vol. 2, issue 1, 1-33

Abstract: Abstract The study investigates the impact of monetary policy on CO2 emissions while controlling for income, trade, foreign direct investment (FDI) and accounting for structural breaks using annual data from 1971 to 2014. By utilizing the extended environmental Kuznets curve (EKC) framework and dynamic ARDL simulations, the results reveal that the Kuznets curve is a long-run phenomenon for India, not a short run. Moreover, interest rates are identified to possess a significantly positive relation with emissions in the short as well as long run. This indicates the sub-optimality of the present monetary policy for sustainable growth. Hence, it suggests incorporating environmental impacts into the central bank’s framework. Additionally, trade is found to be inelastic and weakly beneficial for the environment, while FDI is elastic and significantly detrimental. The latter evidence supports Pollution Haven Hypothesis. Further, following Itkonen (Itkonen, Energy, 2012) arguments, the study demonstrates that inclusion of the energy-use term as a determinant of CO2 emissions for India underestimates the turning point of the long-run Kuznets curve and the total effect of income on emissions. Consequently, such a model yields incorrect estimates.

Keywords: EKC hypothesis; PHH hypothesis; CO2 emissions; Dynamic ARDL simulations; India; Monetary policy (search for similar items in EconPapers)
JEL-codes: C53 E43 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s43546-021-00175-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:snbeco:v:2:y:2022:i:1:d:10.1007_s43546-021-00175-1

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/43546

DOI: 10.1007/s43546-021-00175-1

Access Statistics for this article

SN Business & Economics is currently edited by Gino D'Oca

More articles in SN Business & Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().