THE GROWTH AGENDA AND FINANCING GREEN PROJECTS: AN ENVIRONMENTAL DSGE APPROACH

Arnita Rishanty, Sekar Utami Setiastuti and Nur M. Adhi Purwanto ()
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Sekar Utami Setiastuti: Universitas Gadjah Mada
Nur M. Adhi Purwanto: Bank Indonesia

No WP/13/2021, Working Papers from Bank Indonesia

Abstract: This study aims to develop an environmental dynamic stochastic general equilibrium (E-DSGE) model with heterogeneous production sectors and evaluate possible central bank and fiscal policies towards green and sustainable production. We estimate the model for the Indonesian economy and assess the effects of macroeconomic uncertainty in terms of productivity, monetary, macroprudential, fiscal policy, and financial shocks in a setup that includes policies supporting green firms. We find that aggregate output, consumption, and investment react negatively to a positive monetary policy and government spending shock. Further, we show that emission tax may dampen the contraction of green output due to contractionary monetary and fiscal policy. The effect of green financing subsidy, however, looks trivial

Keywords: DSGE model; Bayesian estimation; Monetary policy; Fiscal policy; Environ- mental policy (search for similar items in EconPapers)
JEL-codes: E32 E50 Q58 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2021
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:idn:wpaper:wp132021

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