Applying a dynamic ARDL approach to the Environmental Phillips Curve (EPC) hypothesis amid monetary, fiscal, and trade policy uncertainty in the USA

Abstract

It is well known that unemployment and environmental degradation are two critical issues across the globe. However, there is an extended dearth of literature that explores the nexus between unemployment and environmental degradation. Kashem and Rahman (Environ. Sci. Pollut. Res. 27(101): 31153–31170, 2020) put forward the Environmental Phillips Curve (EPC) hypothesis, which depicts a negative relationship between unemployment and environmental degradation. This study further explores the validity of the EPC hypothesis in the case of the USA. It also investigates the impact of monetary policy uncertainty (MU), fiscal policy uncertainty (FU), and trade policy uncertainty (TU) on carbon dioxide emissions. To this end, the analysis employs the novel methodology of the dynamic ARDL model. The results document that EPC does not hold in the short run, but it does in the long run. Furthermore, both in the short and long run, MU escalates CO2 emissions, while FU plunges emissions in both the short and long run. Finally, TU does not alter the level of CO2 emissions.