Environmental policy and macroeconomic dynamics in a new Keynesian model

Barbara Annicchiarico () and Fabio Di Dio ()

Journal of Environmental Economics and Management, 2015, vol. 69, issue C, 1-21

Abstract: This paper studies the dynamic behavior of an economy under different environmental policy regimes in a New Keynesian model with nominal and real uncertainty. We find the following results: (i) an emissions cap policy is likely to dampen macroeconomic fluctuations; (ii) staggered price adjustment alters significantly the performance of the environmental policy regime put in place; (iii) the optimal environmental policy response to shocks is strongly influenced by the degree to which prices adjust and by the monetary policy reaction.

Keywords: New Keynesian model; Environmental policy; Macroeconomic dynamics; Monetary policy (search for similar items in EconPapers)
JEL-codes: E32 E50 Q58 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (182)

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Working Paper: Environmental Policy and Macroeconomic Dynamics in a New Keynesian Model (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:69:y:2015:i:c:p:1-21

DOI: 10.1016/j.jeem.2014.10.002

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