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The effects of climate change on a small open economy

George Economides () and Anastasios Xepapadeas ()

No 267, Working Papers from Bank of Greece

Abstract: We investigate the impact of climate change on the macroeconomic performance of a small open economy. The setup is a new Keynesian dynamic stochastic general equilibrium model of a small open economy without monetary policy independence in which a climate module that interacts with the economy has been incorporated. The model is solved numerically using common parameter values, fiscal data and projections about temperature growth from the Greek economy. Our results, suggest that climate change implies a significant output loss and a deterioration of competitiveness. Moreover, it seems that the loss of monetary policy independence is not a big loss, when we investigate the short- and long-term implications of climate change for a small open economy.

Keywords: Climate change; monetary policy; new Keynesian models (search for similar items in EconPapers)
JEL-codes: E5 E1 Q5 (search for similar items in EconPapers)
Pages: 45
Date: 2019-09
New Economics Papers: this item is included in nep-cba, nep-dge, nep-env, nep-mac and nep-ore
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