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.
Highlights
Environmental degradation and climate change in affecting countries all around the world, the intensity of its adverse effects vary in several regions based on their geographies
The rising levels of energy consumption and carbon intensity is considered alarming for Indonesian Government that is motivated to accommodate according to increasing climate change
Due to the speculative and existential background that indicate the factors and on the other hand, according to Fredrick and Lundstorm (2012), CO2 explains that total carbon dioxide emission in a country, IR represents as interest rate, ER denotes exchange rate and measures and GDP explains as total finish goods and services
Summary
Environmental degradation and climate change in affecting countries all around the world, the intensity of its adverse effects vary in several regions based on their geographies. The rising levels of energy consumption and carbon intensity is considered alarming for Indonesian Government that is motivated to accommodate according to increasing climate change. According to UN-Conference, the current environmental problem is pollution generated by man which damages greenhouse effect probably caused by greenhouse gases among which carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and chloro-fluoro-carbons are important. Another worst issue is an abatement of ozone layer. Carbon dioxide is regarded as the major threat of environmental sustainability (Giavazzi, 2002) This makes it prudent first to consider the problem of cunning and evaluation of policies directed against excessive carbon intensity and degrading environmental condition. The remaining of the study is followed by literature review which highlights the outcomes and research gap of from the previous study, methodology which explain the modelling framework of the current study, followed by data analysis which explain the effect of considered variables in the short and long run period, and conclusion and discussion section provide the valid policy formulation to the government
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