Fiscal and Monetary Policies Toward Green Growth

Abstract

Purpose: This study analyzes the impact of fiscal and monetary policies on green growth across 45 Asian countries over the period 1995 - 2024.
Design/methodology/approach: The analysis employs a Bayesian regression
framework using the Metropolis–Hastings algorithm together with standard MCMC convergence diagnostics.
Findings: The results show that within the fiscal policy group, green public expenditure (EEP) and fiscal balance (FBAL) fall within the negative region of the posterior distribution, indicating a tendency to reduce GGDP. In contrast, environmental taxes (ETAX) and public debt (GGG) exhibit positive associations with GGDP. Public investment in renewable energy (MRE) demonstrates a neutral effect. For monetary policy variables, the policy interest rate (RATE) has a posterior interval entirely below zero, suggesting that higher capital costs are associated with lower GGDP, whereas financial development (FD) yields a large positive coefficient, representing the strongest transmission channel supporting GGDP. Private-sector credit (DCRE) shows a neutral effect. In addition, CO2 emissions and R&D expenditure are associated with lower GGDP, while inflation displays a positive relationship with GGDP; trade openness yields neutral results.
Originality/value: Beyond elucidating the mechanisms through which macroeconomic policies affect green growth in the region, the findings provide useful references for policymakers in designing coordinated fiscal–monetary policy frameworks, thereby promoting sustainable growth in the context of mounting environmental pressures.