Analysis of the macroeconomic and financial stability impact of the transition to net zero emissions in Poland using DSGE modelling

Prince Anienwe and Keshab Bhattarai

MPRA Paper from University Library of Munich, Germany

Abstract: A ten-equation Dynamic Stochastic General Equilibrium (DSGE) model is designed to capture household optimization, firm production decisions, environmental dynamics, and banking sector vulnerabilities during Net Zero Emission transition periods. It is calibrated to Polish macroeconomic data from 2000 to 2019 to evaluate various policy scenarios, including gradual versus rapid carbon tax implementation and different emission reduction targets. Results highlight critical trade-offs among environmental goals, economic stability, and financial system resilience. The analysis shows that Poland can reach its net-zero emissions target while maintaining macroeconomic stability through coordinated policy measures, with productivity gains generating positive spillovers across the economy. This study addresses significant gaps in environmental macroeconomic modelling for Central and Eastern European contexts, providing new insights for Poland's EU-mandated decarbonization policy while preserving economic and financial stability.

Keywords: DSGE Modelling; Net-Zero Transition; Carbon Taxation; Environmental Policy; Macroeconomic Stability; Financial Stability (search for similar items in EconPapers)
JEL-codes: C54 E6 O5 Q5 (search for similar items in EconPapers)
Date: 2026-01-13, Revised 2026-01-13
New Economics Papers: this item is included in nep-dge
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