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Interactions among macroeconomic policies, the energy market and environmental quality

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  • Ivan Hajdukovic

    (University of Barcelona)

Abstract

This paper provides an empirical examination on the interactions among macroeconomic policies, the energy market and environmental quality. The analysis is conducted for two non-EMU countries, Switzerland and the United Kingdom, over the period 1990–2016. We propose two distinct VAR models based on a macroeconomic framework including the energy market. The study evaluates the dynamic effects of shocks to fiscal and monetary policy on the energy market and environmental quality. We identify four policy shocks: (i) government consumption (ii) public investment (iii) the official bank policy rate (iv) the central bank’s reserve assets. The empirical analysis reveals that fiscal and monetary policies have a significant influence on the energy market and environmental quality. Our findings indicate that fiscal policy, besides its primary role in stabilizing economic activity, can contribute to achieving non-renewable energy conservation and enhancing environmental quality. On the other hand, the examination of monetary policy reveals that central banks should investigate the impact of their interventions on the energy market and incorporate environmental issues in their welfare maximization problem.

Suggested Citation

  • Ivan Hajdukovic, 2021. "Interactions among macroeconomic policies, the energy market and environmental quality," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(4), pages 861-913, October.
    • Handle: RePEc:spr:envpol:v:23:y:2021:i:4:d:10.1007_s10018-021-00305-x
    DOI: 10.1007/s10018-021-00305-x
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    More about this item

    Keywords

    Air Pollution; Energy markets; Fiscal policy; Monetary policy; Vector autoregression;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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