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Greta Thunberg effect and Business Cycle Dynamics: A DSGE model

Francesco Busato, Bruno Chiarini, Gianluigi Cisco and Maria Ferrara

MPRA Paper from University Library of Munich, Germany

Abstract: The increasing concerns for the future effects of global warming have given rise to an unprecedented wave of environmental activism. This paper studies how this call for stronger climate actions could influence macroeconomic dynamics. We explore this topic, employing a Dynamic Stochastic General Equilibrium (DSGE) model extended to consider two classes of goods (i.e., Green and Dirty), variable green preferences, and a "Greta Thunberg" shock affecting consumers' sustainable attitudes. We find that: (i) environmental awareness plays a key role in reducing carbon emissions and green preferences; (ii) Greta Thunberg effect slows down aggregate output and investment; (iii) a green preference shock contributes to around 15 and 29 % of consumption, investment, and labor volatilities at the aggregate level.

Keywords: Carbon Emissions; Environmental Awareness; DSGE model; General Equilibrium; Global Warming; Green Consumer Behavior (search for similar items in EconPapers)
JEL-codes: E32 Q51 Q54 (search for similar items in EconPapers)
Date: 2021-10-14
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-mac
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