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Environmental expenditure spillovers: Evidence from an estimated multi-area DSGE model

Xiongfeng Pan, Haitao Xu, Mengna Li, Tianjiao Zong, Chew Tin Lee and Yuduo Lu

Energy Economics, 2020, vol. 86, issue C

Abstract: This article constructs and estimates a multi-area dynamic stochastic general equilibrium model with a spatial simultaneous equation. Taking Beijing-Tianjin-Hebei region in China as an example, we explain the dynamic effect of environmental expenditure shock and its spillover effects. Environmental expenditure has an obvious crowding-out effect on consumption and investment in local area, but has some positive influences on the economy of external regions. Over the business cycle, environmental expenditure shock in local area can well explain the volatility of real output and social investment in the last 52 quarters. However, environmental expenditure shocks in external regions have little contribution to the volatility of output and investment in local area. One interesting result is that the contribution of environmental expenditure shocks in external regions to the trend of pollution fluctuation is greater than that in local area.

Keywords: Environmental expenditure; Spillover effects; Multi-area DSGE model; Pollutant emissions; Economic fluctuation (search for similar items in EconPapers)
JEL-codes: E32 H59 O13 Q53 Q56 Q58 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eneco.2019.104645

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