The Role of Green Monetary and Fiscal Policies in Achieving Economic Sustainability: A Structural Equation Modeling Approach

Document Type : Research Paper

Authors

1 Department of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran.

2 Department of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran

3 گروه اقتصاد، دانشکده اقتصاد و علوم اجتماعی، دانشگاه بوعلی سینا، همدان، ایران.

10.30465/jnet.2025.51885.2197

Abstract

In response to environmental challenges and the growing need for economic sustainability, this study evaluates the effectiveness of green monetary and fiscal policies across two country groups—ten developed economies and selected MENA nations over the period 2013 to 2023. The analysis employs Partial Least Squares Structural Equation Modeling to estimate relationships using panel data, with latent constructs validated through multi-stage Confirmatory Factor Analysis.
Findings indicate that in developed countries, green policies have a highly significant impact on increasing investment (β = 0.929; p < 0.001), while their effect on reducing pollution is not statistically significant. However, both investment and pollution exhibit positive and meaningful contributions to economic sustainability.
In contrast, in MENA countries, green policies play a significant role in reducing pollution (β = 0.702; p < 0.001) and boosting investment (β = 0.804; p < 0.001), yet neither variable demonstrates a significant effect on sustainability. Only population shows a statistically significant positive influence on sustainability in these nations.
The results highlight structural differences between the two groups and underscore the necessity of tailoring green policy designs to local institutional contexts in order to achieve sustainable economic outcomes.

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History

  • Receive Date: 07 May 2025
  • Revise Date: 08 August 2025
  • Accept Date: 17 August 2025

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