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Environmental policy and macroeconomic dynamics in a new Keynesian model

Listed author(s):
  • Annicchiarico, Barbara
  • Di Dio, Fabio

This paper studies the dynamic behavior of an economy under different environmental policy regimes in a New Keynesian model with nominal and real uncertainty. We find the following results: (i) an emissions cap policy is likely to dampen macroeconomic fluctuations; (ii) staggered price adjustment alters significantly the performance of the environmental policy regime put in place; (iii) the optimal environmental policy response to shocks is strongly influenced by the degree to which prices adjust and by the monetary policy reaction.

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File URL: http://www.sciencedirect.com/science/article/pii/S0095069614000850
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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 69 (2015)
Issue (Month): C ()
Pages: 1-21

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Handle: RePEc:eee:jeeman:v:69:y:2015:i:c:p:1-21
DOI: 10.1016/j.jeem.2014.10.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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