This paper presents a dynamic stochastic general equilibrium (DSGE) model of environmental policy for a two-country economy and studies the international transmission of asymmetric shocks considering two different economy-wide greenhouse gases (GHG) emission regulations: a carbon tax and a cap-and-trade system allowing for cross-border exchange of emission permits. We find that international spillovers of shocks are strongly influenced by the environmental regime put in place. The cross-border reaction to shocks is found to be magnified under a carbon tax. The pattern of trade and the underlying monetary regime influence the international transmission channels interacting with the environmental policy adopted. (C) 2019 Elsevier B.V. All rights reserved.
Annicchiarico, B., Diluiso, F. (2019). International transmission of the business cycle and environmental policy. RESOURCE AND ENERGY ECONOMICS, 58, 1-29 [10.1016/j.reseneeco.2019.07.006].
International transmission of the business cycle and environmental policy
Annicchiarico B.
Writing – Original Draft Preparation
;Diluiso F.Formal Analysis
2019-01-01
Abstract
This paper presents a dynamic stochastic general equilibrium (DSGE) model of environmental policy for a two-country economy and studies the international transmission of asymmetric shocks considering two different economy-wide greenhouse gases (GHG) emission regulations: a carbon tax and a cap-and-trade system allowing for cross-border exchange of emission permits. We find that international spillovers of shocks are strongly influenced by the environmental regime put in place. The cross-border reaction to shocks is found to be magnified under a carbon tax. The pattern of trade and the underlying monetary regime influence the international transmission channels interacting with the environmental policy adopted. (C) 2019 Elsevier B.V. All rights reserved.File | Dimensione | Formato | |
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