Fiscal Policy Shocks and Green Growth in China

Existing literature has extensively analyzed the socioeconomic impacts of fiscal policy fluctuations. However, analysis of fiscal policy fluctuations in relation to Green Growth (GG) is still scant. Using the NARDL technique, the study analyzes the relationship between negative and positive fluctuations in fiscal policy and GG in China from 1990 to 2020, while controlling for employment and capital stock. The findings of the study reveal that positive fluctuations in fiscal policy decrease GG in China during the long run. In contrast, negative fluctuations in fiscal policy do not have a lasting impact on GG. These findings demonstrate the effectiveness of fiscal policy fluctuations in fostering GG and reducing the adverse environmental effects of China’s economic activity.