Abstract
The aim of the article is to analyse the impact of expansionary fiscal policy, involving an overall increase in government expenditure, on the condition of the natural environment and, more specifically, on air pollution. The analysis is based on the Real Business Cycle (RBC) model. The results of the simulations indicate that expansionary fiscal policy, contributing to GDP growth, also results in deterioration of air quality. The analysis also shows that in the longer term, the main mechanism by which this policy affects the level of air pollution emission is the accumulation of public capital. Therefore, in order to minimise the negative effects of fiscal expansion on the environment, it is particularly important to invest in pro-ecological public investments.
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