The Study of Green Tax Role on the Effectiveness of Monetary Policy in Iran's Economy with DSGE Approach

Maysam Nasrindoost (), Mohammad Ali Falahi () and Ali Cheshomi ()
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Maysam Nasrindoost: Ph.D. Student in Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran
Mohammad Ali Falahi: Professor, Department of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran
Ali Cheshomi: Assistant Professor, Department of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

Quarterly Journal of Applied Theories of Economics, 2025, vol. 11, issue 4, 131-168

Abstract: Pollution and climate change affect countries' economies, especially by reducing total productivity factors. For this reason, the green tax, as the most direct and transparent climate control policy, has attracted the attention of economic policymakers. On the other hand, today, the role of climate change in the success of central banks in implementing monetary policy is also focused on. As a result, the question is raised of whether the effectiveness of the monetary policy in controlling inflation and the production gap increases with the presence of green tax. To answer this question, the E-DSGE model was designed to take into account macroeconomic and climate policy considerations at the same time. The results showed that monetary policy reduces the production gap caused by the climate crisis and controls the resulting inflation. The duration of the implementation of monetary policy does not differ in the presence or absence of the green tax. However, in terms of quantity, in the case where there is a green tax, the monetary policy is more efficient. However, if the green tax rate is large enough, monetary policy is more efficient in terms of time and quantity

Keywords: climate change; the effectiveness of the central banks monetary policy; Green tax; ecological economics (search for similar items in EconPapers)
JEL-codes: C68 E12 Q54 (search for similar items in EconPapers)
Date: 2025
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