How Economic Policies Drive Climate Change: A Comparative Analysis of Groups of Middle- and High-Income Countries

Abstract

Fiscal and monetary policies are considered a main tool for any economy to achieve the desirable goals or to counter-cycle any problem facing the economy and one of the biggest deals facing any society is climate change. Thus, in this paper we are studying the effect of these policies on climate change by using panel data models across various countries according to income levels in the period from 1990 to 2020. The study explores how economic policies influence carbon dioxide (CO₂) emissions to provide valuable insights for policymakers and researchers to integrate environmental considerations into economic decision-making processes. The findings indicate that economic policies significantly influence CO₂ emissions in both middle and high-income countries, except for the tax revenue in high-income countries. Findings reveal significant relationships between fiscal and monetary outcomes, highlighting the role of economic policies in addressing climate change.