Does monetary policy impact CO2 emissions? : a GVAR analysis.
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Date
2023
Authors
Attílio, Luccas Assis
Faria, João Ricardo
Rodrigues, Mauro
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Abstract
This paper studies the relationship between monetary policy and CO2 emissions. Our contribution is twofold: (i)
we present a stylized dynamic AD-AS model with Global Value Chains (GVC) and carbon emissions to illustrate
this relationship, (ii) we estimate the effect of monetary policy on emissions using the GVAR methodology, which
explicitly considers the interconnection between regions instead of treating them as isolated economies. We focus
on CO2 emissions in four regions: U.S., U.K., Japan and the Eurozone, but we use data from 8 other countries to
characterize the international economy. Our results show that a monetary contraction in a country is associated
with lower domestic emissions both in the short- and the long-run. Although we do not find evidence of cross-
region effects concerning monetary policy, variance decomposition suggests that external factors are relevant to
understanding each region’s fluctuations in emissions.
Description
Keywords
Pollution, International linkages
Citation
ATTÍLIO, L. A.; FARIA, J. R.; RODRIGUES, M.; Does monetary policy impact CO2 emissions?: a GVAR analysis. Energy Economics, v. 119, artigo 106559, mar. 2023. Disponível em: <https://www.sciencedirect.com/science/article/pii/S0140988323000579?via%3Dihub>. Acesso em: 01 mar. 2023.