Modelling the economic effects of COVID-19 and possible green recovery plans: a post-Keynesian approach

Hector Pollitt, Richard Lewney, Bence Kiss-Dobronyi and Xinru Lin

Climate Policy, 2021, vol. 21, issue 10, 1257-1271

Abstract: Only twelve years after the global financial crisis, in 2020 the world was again in economic crisis. This time around, the source of the crisis was the COVID-19 global pandemic, which has affected the economy differently than the global financial crisis. However, as they were in 2008–2009, conventional macroeconomic theory and models have once again been found wanting, and economists have again turned for insights to the work of Keynes and more recent post-Keynesian scholars. This paper explores a simulation of the macroeconomic impacts of COVID-19 using the E3ME macro-econometric model. It describes two potential recovery packages, one of which could be described as ‘green’. The modelling shows that the green recovery package could support the global economy and national labour markets through the recovery period, outperforming an equivalent conventional stimulus package while simultaneously reducing global CO2 emissions by 12%.Key policy insightsA green recovery plan is assessed against a reference scenario with COVID-19. It outperforms a non-green recovery plan of comparable value, while also reducing CO2 emissions by up to 12% below the reference scenario (15% below no-COVID baseline).The policies in the green recovery plan provide different relative impacts. Car scrappage schemes that promote the uptake of electric vehicles have the largest impact on GDP and jobs. Renewables, energy efficiency and electric vehicle promotion all have large impacts on emissions.The green recovery plan boosts production levels in all sectors of the economy except for energy and utilities. It boosts the consumer services sector that has been most affected initially by the pandemic but also the investment sectors that could suffer longer-term damage.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1080/14693062.2021.1965525 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:tcpoxx:v:21:y:2021:i:10:p:1257-1271

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/tcpo20

DOI: 10.1080/14693062.2021.1965525

Access Statistics for this article

Climate Policy is currently edited by Professor Michael Grubb

More articles in Climate Policy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().