The Green Metamorphosis of a small Open Economy

Florencia S. Airaudo, Evi Pappa and Hernán Seoane
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Florencia S. Airaudo: Universidad Carlos III de Madrid

No 219, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: We design a small open economy model where production combines energy and traditional factors with low short run substitutability and efficient technology adoption. We study green transitional dynamics. Permanent increases in brown energy prices induce a green transition with short run inflation and persistent output losses. Fiscal policy impacts the transition. Brown energy taxes are inflationary and crowd out brown energy use in favor of green energy. Green public investment or green subsidies have moderate macroeconomic effects, but do not crowd out brown energy use. We discuss fiscal costs and evaluate welfare along the green transition using different metrics

Pages: 55 pages
Date: 2023-02
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-opm
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Citations: View citations in EconPapers (8)

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https://rednie.eco.unc.edu.ar/files/DT/219.pdf (application/pdf)

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Working Paper: The green metamorphosis of a small open economy (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:219

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