Asymmetric Impact of Fiscal Policies on Environmental Deterioration: Evidence from the NARDL Model for Türkiye

In this study, an analysis based on the NARDL model has been conducted using data from 1970 to 2020 to investigate the impact of fiscal policy tool, public expenditures, on environmental degradation. This approach has the capability of dissecting the effects of expansionary and contractionary fiscal policies related to public expenditures on environmental degradation and provides coefficient estimations for both short and long run. The results suggest that expansionary fiscal policy leads to a reduction in CO2 emissions in the long run. In contrast, it has been observed that contractionary fiscal policy does not have a significant impact on CO2 emissions in the long run. Accordingly, it has been determined that public expenditures in Turkey do not contribute positively to environmental pollution. Moreover, although an increase in income is associated with increased CO2 emissions in the long run, the validity of the Environmental Kuznets Curve hypothesis is not confirmed for Turkey. Fossil fuel consumption, as theoretically anticipated, raises CO2 emissions in both the short and long run. Thus, prioritizing the use of renewable energy sources becomes a necessity to mitigate environmental degradation. Additionally, public expenditures have no short-run impact on CO2 emissions. The study is believed to make an important contribution by addressing the gap in the literature through the application of an asymmetric approach to analyze the influence of public expenditures on environmental pollution in the context of Turkey. Furthermore, the obtained findings for Turkey are considered valuable for both researchers and governmental authorities. It is imperative to pay heed to the implementation of environmentally conscious and pollution-reducing fiscal policies. Furthermore, the promotion of renewable energy utilization should be emphasized to enhance environmental quality.