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Climate Policy, Financial Frictions, and Transition Risk / Stefano Carattini, Garth Heutel, Givi Melkadze.
- Format:
- Book
- Author/Creator:
- Carattini, Stefano.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28525.
- NBER working paper series no. w28525
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- We study climate and macroprudential policies in an economy with financial frictions. Using a dynamic stochastic general equilibrium model featuring both a pollution market failure and a market failure in the financial sector, we explore transition risk - whether ambitious climate policy can lead to macroeconomic instability. It can, but the risk can be alleviated through macroprudential policies - taxes or subsidies on banks' assets. Then, we explore efficient climate and macroprudential policy in the long run and over business cycles. The presence of financial frictions affects the steady-state value and dynamic properties of the efficient carbon tax. Macroprudential policy alone, without a carbon tax, is not very effective at addressing the pollution externality.
- Notes:
- Print version record
- March 2021.
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