EconPapers    
Economics at your fingertips  
 

Climate Policies, Macroprudential Regulation, and the Welfare Cost of Business Cycles

Barbara Annicchiarico, Marco Carli and Francesca Diluiso ()

No 543, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We study the performance of alternative climate policies in a dynamic stochastic general equilibrium model that includes an environmental externality and agency problems associated with financial intermediation. Heterogeneous polluting producers finance their capital acquisition by combining their resources with loans from banks, are subject to environmental regulation, are hit by idiosyncratic shocks, and can default. The welfare analysis suggests that a cap-and-trade system will entail substantially lower costs of the business cycle than a carbon tax if financial frictions are stringent, firm leverage is high, and agents are sufficiently risk-averse. Simple macroprudential policy rules can go a long way in reining in business cycle fluctuations, aligning the performance of price and quantity pollution policies, and reducing the uncertainty inherent to the chosen climate policy tool.

Keywords: Business Cycle; Cap-and-Trade; Carbon Tax; E-DSGE (search for similar items in EconPapers)
JEL-codes: E32 E44 Q58 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2022-10-31, Revised 2022-10-31
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-ene, nep-env and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ceistorvergata.it/RePEc/rpaper/RP543.pdf Main text (application/pdf)

Related works:
Working Paper: Climate policies, macroprudential regulation, and the welfare cost of business cycles (2023) Downloads
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:rtv:ceisrp:543

Ordering information: This working paper can be ordered from
CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
https://ceistorvergata.it

Access Statistics for this paper

More papers in CEIS Research Paper from Tor Vergata University, CEIS CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma. Contact information at EDIRC.
Bibliographic data for series maintained by Barbara Piazzi ().

 
Page updated 2024-06-14
Handle: RePEc:rtv:ceisrp:543