IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2020-03-63.html
   My bibliography  Save this article

The Role of Fiscal Policy and Monetary Policy in Environmental Degradation in Indonesia

Author

Listed:
  • Didin Muhafidin

    (Department of Public Policy, Faculty of Social and Political Sciences, Padjadjaran University, Bandung, Indonesia.)

Abstract

This study pores over the significance of Fiscal policy and monetary policy that s describe the effects on environmental issues. With the help of multiple linearregression, we found out the result that clearly explains the impact of fiscal and monetary policy on environmental issues like CO2 emission. We have used three variables, i.e., GDP, exchange rate, and interest rate with CO2 emission. For considering the possible finding on the impact of fiscal and monetary policy according to the pollution sources, we can also distinguish in between the consumptions and productions that are generated by CO2 emissions. The emission of CO2 and that isaffected by an increase in the interest rate, and exchange rate and also GDP contributes the great role in affected the environmental issues. The results of ARDL bound testing confirm a strong relationship between fiscal policy, monetary policy economic growth, and CO2 emission in Indonesia. The long-run coefficient further confirms that fiscal and monetary policy are still in phase to enhance the environmental degradation in Indonesia. However, the government should pay extra attention to introduce some innovation in the domain of technology while formulating fiscal policies.

Suggested Citation

  • Didin Muhafidin, 2020. "The Role of Fiscal Policy and Monetary Policy in Environmental Degradation in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 10(3), pages 504-510.
    • Handle: RePEc:eco:journ2:2020-03-63
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/9586/5059
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/9586/5059
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrew Mountford & Harald Uhlig, 2009. "What are the effects of fiscal policy shocks?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 960-992.
    2. Zhang, Yue-Jun & Da, Ya-Bin, 2015. "The decomposition of energy-related carbon emission and its decoupling with economic growth in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1255-1266.
    3. repec:eco:journ2:2017-04-24 is not listed on IDEAS
    4. Jaelani, Aan & Firdaus, Slamet & Jumena, Juju, 2017. "Renewable Energy Policy in Indonesia: The Qur'anic Scientific Signals in Islamic Economics Perspective," MPRA Paper 84622, University Library of Munich, Germany, revised 18 Sep 2017.
    5. Hameed Olusegun Adebambo & Hasbullah Ashari & Norani Nordin, 2014. "Antecedents and Outcome of Sustainable Environmental Manufacturing Practices," International Journal of Management and Sustainability, Conscientia Beam, vol. 3(3), pages 147-159.
    6. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
    7. Hameed Olusegun Adebambo & Hasbullah Ashari & Norani Nordin, 2014. "Antecedents and Outcome of Sustainable Environmental Manufacturing Practices," International Journal of Management and Sustainability, Conscientia Beam, vol. 3(3), pages 147-159.
    8. Tang, Chor Foon & Tan, Bee Wah, 2015. "The impact of energy consumption, income and foreign direct investment on carbon dioxide emissions in Vietnam," Energy, Elsevier, vol. 79(C), pages 447-454.
    9. Ufomba Henry, 2014. "Globalization and Environmental Issues: A New Framework for Security Analysis," Humanities and Social Sciences Letters, Conscientia Beam, vol. 2(4), pages 209-216.
    10. Muhammad Azam & Muhammad Haseeb & Aznita Binti Samsi & Jimoh Olajide Raji, 2016. "Stock Market Development and Economic Growth: Evidences from Asia-4 Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1200-1208.
    11. Alshehry, Atef Saad & Belloumi, Mounir, 2015. "Energy consumption, carbon dioxide emissions and economic growth: The case of Saudi Arabia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 237-247.
    12. Begum, Rawshan Ara & Sohag, Kazi & Abdullah, Sharifah Mastura Syed & Jaafar, Mokhtar, 2015. "CO2 emissions, energy consumption, economic and population growth in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 594-601.
    13. Sarantis, Nicholas & Stewart, Chris, 2003. "Liquidity constraints, precautionary saving and aggregate consumption: an international comparison," Economic Modelling, Elsevier, vol. 20(6), pages 1151-1173, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Melike Bildirici & Yasemin Asu Çırpıcı & Özgür Ömer Ersin, 2023. "Effects of Technology, Energy, Monetary, and Fiscal Policies on the Relationship between Renewable and Fossil Fuel Energies and Environmental Pollution: Novel NBARDL and Causality Analyses," Sustainability, MDPI, vol. 15(20), pages 1-27, October.
    2. Sun, Chuanwang & Khan, Anwar & Liu, Yongzhe & Lei, Ni, 2022. "An analysis of the impact of fiscal and monetary policy fluctuations on the disaggregated level renewable energy generation in the G7 countries," Renewable Energy, Elsevier, vol. 189(C), pages 1154-1165.
    3. Omodero Cordelia Onyinyechi, 2023. "Fiscal and Monetary Measures in Achieving Green Ecology: Evidence from Nigeria," Folia Oeconomica Stetinensia, Sciendo, vol. 23(2), pages 311-330, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Usama Al-Mulali & Ilhan Ozturk & Hooi Lean, 2015. "The influence of economic growth, urbanization, trade openness, financial development, and renewable energy on pollution in Europe," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 79(1), pages 621-644, October.
    2. Xiao-Ying Dong & Qiying Ran & Yu Hao, 2019. "On the nonlinear relationship between energy consumption and economic development in China: new evidence from panel data threshold estimations," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(4), pages 1837-1857, July.
    3. Ahmed Nahar Al-Hussaini, 2019. "The Role of Financial Management in Testing Environmental Kuznets Curve in Kuwait: Evidence from ARDL Bound Testing Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 9(3), pages 353-359.
    4. Andhyka Tyaz Nugraha & Nor Hasni Osman, 2019. "CO2 Emissions, Economic Growth, Energy Consumption, and Household Expenditure for Indonesia: Evidence from Cointegration and Vector Error Correction Model," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 291-298.
    5. Obsatar Sinaga & Omar Alaeddin & Noor H. Jabarullah, 2019. "The Impact of Hydropower Energy on the Environmental Kuznets Curve in Malaysia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 308-315.
    6. Azhar Susanto & Meiryani Meiryani, 2019. "The impact of Environmental Accounting Information System Alignment on Firm Performance and Environmental Performance: A case of Small and Medium Enterprises s of Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 229-236.
    7. Winwin Yadiati & Nissa Nissa & Sugiono Paulus & Harry Suharman & Meiryani Meiryani, 2019. "The Role of Green Intellectual Capital and Organizational Reputation in Influencing Environmental Performance," International Journal of Energy Economics and Policy, Econjournals, vol. 9(3), pages 261-268.
    8. Ratneswary Rasiah & Vinitha Guptan & Muzafar Shah Habibullah, 2018. "Evaluating the Impact of Financial and Economic Factors on Environmental Degradation: A Panel Estimation Study of Selected Asean Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 209-216.
    9. Abubakar Hamid Danlami & Shri-Dewi Applanaidu & Rabiul Islam, 2018. "Movement towards a low carbon emitted environment: a test of some factors in Malaysia," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 20(3), pages 1085-1102, June.
    10. Muhammad Yusuf & Zakir Sabara & Ismail Suardi Wekke, 2019. "Role of Innovation in Testing Environment Kuznets Curve: A Case of Indonesian Economy," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 276-281.
    11. Muhammad Uzair Ali & Zhimin Gong & Muhammad Ubaid Ali & Fahad Asmi & Rizwanullah Muhammad, 2022. "CO2 emission, economic development, fossil fuel consumption and population density in India, Pakistan and Bangladesh: A panel investigation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 18-31, January.
    12. Samargandi, Nahla, 2017. "Sector value addition, technology and CO2 emissions in Saudi Arabia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 78(C), pages 868-877.
    13. Nor Aznin Abu Bakar & Jimoh Olajide Raji & Rana Muhammad Adeel-Farooq, 2019. "Greenfield, Mergers & Acquisitions, Energy Consumption, and Environmental Performance in selected SAARC and ASEAN countries," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 216-224.
    14. Moataz Elshimy & Khadiga M. El-Aasar, 2020. "Carbon footprint, renewable energy, non-renewable energy, and livestock: testing the environmental Kuznets curve hypothesis for the Arab world," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(7), pages 6985-7012, October.
    15. Ansari, Mohd Arshad, 2022. "Re-visiting the Environmental Kuznets curve for ASEAN: A comparison between ecological footprint and carbon dioxide emissions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    16. Le Hoang Phong, 2019. "Globalization, Financial Development, and Environmental Degradation in the Presence of Environmental Kuznets Curve: Evidence from ASEAN-5 Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 40-50.
    17. Karaaslan, Abdulkerim & Çamkaya, Serhat, 2022. "The relationship between CO2 emissions, economic growth, health expenditure, and renewable and non-renewable energy consumption: Empirical evidence from Turkey," Renewable Energy, Elsevier, vol. 190(C), pages 457-466.
    18. Seker, Fahri & Ertugrul, Hasan Murat & Cetin, Murat, 2015. "The impact of foreign direct investment on environmental quality: A bounds testing and causality analysis for Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 347-356.
    19. Muhammad Shahbaz & Avik Sinha, 2019. "Environmental Kuznets curve for CO2emissions: a literature survey," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(1), pages 106-168, January.
    20. Mohd Haizam Mohd Saudi & Obsatar Sinaga & Noor H. Jabarullah, 2019. "The Role of Renewable, Non-renewable Energy Consumption and Technology Innovation in Testing Environmental Kuznets Curve in Malaysia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 299-307.

    More about this item

    Keywords

    Fiscal policy; Monetary policy; environmental degradation; Indonesia.;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2020-03-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.