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- Title
CLIMATE POLICIES AND BUSINESS CYCLES: THE EFFECTS OF A DYNAMIC CAP.
- Authors
Eydam, Ulrich
- Abstract
Emissions are directly linked to economic output and consequently subject to business cycle fluctuations. The present study analyses the interactions between climate policies and business cycles through the lens of a New Keynesian dynamic stochastic general equilibrium model. We compare a static cap-and-trade policy with a dynamically adjusting policy in terms of macroeconomic stabilisation, welfare and emissions price dynamics. The results of the quantitative evaluation suggest that a constant policy leads to lower aggregate volatility but is associated with larger welfare costs. In contrast, under the dynamic policy emissions prices and labour markets display less variations.
- Subjects
BUSINESS cycles; GOVERNMENT policy on climate change; LABOR market; PRICES; MARKET prices; FIELD emission
- Publication
National Institute Economic Review, 2023, Vol 264, p75
- ISSN
0027-9501
- Publication type
Article
- DOI
10.1017/nie.2023.12