IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v221y2024icp586-601.html
   My bibliography  Save this article

Green transition and macroeconomic stabilization

Author

Listed:
  • Yanovski, Boyan
  • Tahri, Ibrahim
  • Lessmann, Kai

Abstract

This paper looks into the crucial macroeconomic feedback mechanisms emerging from the interplay among the goods market, the labor market, the financial sector, and monetary policy, particularly in the context of transitioning towards a climate-neutral economy. The investment decisions of firms, pivotal in this interaction, can trigger feedback loops with potentially destabilizing effects, underscoring the critical role of investment within the complex interplay of market and sector dynamics in the macroeconomy. Governmental intervention is highlighted as a key factor in steering the green transition while preserving economic stability. A carbon tax on fossil fuel consumption is proposed as a primary tool for facilitating this green transition. Our investigation employs a disequilibrium model of monetary growth, a la Keynes-Metzler-Goodwin (KMG), incorporating a portfolio perspective across three asset markets - money, bonds, and stocks. This framework allows for an in-depth analysis of how a carbon tax influences real production, inflation, and inequality during the transition. Our findings indicate that imposing a carbon tax on production does not markedly disrupt economic stability, as long as the carbon pricing and its growth rate remain within low bounds.

Suggested Citation

  • Yanovski, Boyan & Tahri, Ibrahim & Lessmann, Kai, 2024. "Green transition and macroeconomic stabilization," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 586-601.
    • Handle: RePEc:eee:jeborg:v:221:y:2024:i:c:p:586-601
    DOI: 10.1016/j.jebo.2024.03.022
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S016726812400115X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2024.03.022?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chiarella,Carl & Flaschel,Peter, 2011. "The Dynamics of Keynesian Monetary Growth," Cambridge Books, Cambridge University Press, number 9780521180184, September.
    2. Matthieu Charpe & Peter Flaschel & Hans-Martin Krolzig & Christian Proaño & Willi Semmler & Daniele Tavani, 2015. "Credit-driven investment, heterogeneous labor markets and macroeconomic dynamics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(1), pages 163-181, April.
    3. Richters, Oliver, 2021. "Modeling the out-of-equilibrium dynamics of bounded rationality and economic constraints," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 846-866.
    4. Franke, Reiner & Flaschel, Peter & Proano, Christian R., 2006. "Wage-price dynamics and income distribution in a semi-structural Keynes-Goodwin model," Structural Change and Economic Dynamics, Elsevier, vol. 17(4), pages 452-465, December.
    5. J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(2), pages 209-223.
    6. Peter Flaschel & Hans-Martin Krolzig, 2006. "Wage Price Phillips Curves and Macroeconomic Stability: Basic Structural Form, Estimation and Analysis," Contributions to Economic Analysis, in: Quantitative and Empirical Analysis of Nonlinear Dynamic Macromodels, pages 4-48, Emerald Group Publishing Limited.
    7. H. Rose, 1967. "On the Non-Linear Theory of the Employment Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(2), pages 153-173.
    8. Carl Chiarella & Peter Flaschel & Reiner Franke & Willi Semmler, 2006. "A High-Dimensional Model of Real-Financial Market Interaction: The Cascade of Stable Matrices Approach," Contributions to Economic Analysis, in: Quantitative and Empirical Analysis of Nonlinear Dynamic Macromodels, pages 359-384, Emerald Group Publishing Limited.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Toichiro Asada & Carl Chiarella & Peter Flaschel, 2003. "Keynes-Metzler-Goodwin Model Building: The Closed Economy," Working Paper Series 124, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    2. Rada, Codrina & Tavani, Daniele & von Arnim, Rudiger & Zamparelli, Luca, 2023. "Classical and Keynesian models of inequality and stagnation," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 442-461.
    3. Ogawa, Shogo, 2022. "Monetary growth with disequilibrium: A non-Walrasian baseline model," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 512-528.
    4. Asada, Toichiro & Chen, Pu & Chiarella, Carl & Flaschel, Peter, 2006. "Keynesian dynamics and the wage-price spiral: A baseline disequilibrium model," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 90-130, March.
    5. Di Guilmi, Corrado & Galanis, Giorgos & Proaño, Christian R., 2023. "A Baseline Model of Behavioral Political Cycles and Macroeconomic Fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 50-67.
    6. Chen Pu & Flaschel Peter, 2006. "Measuring the Interaction of Wage and Price Phillips Curves for the U.S. Economy," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(4), pages 1-35, December.
    7. Hiroki Murakami, 2019. "A note on the “unique” business cycle in the Keynesian theory," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 384-404, July.
    8. K. Vela Velupillai, 2012. ""Dear Professor Mankiw..."- Reflections on Four Decades of Learning and Teaching Macroeconomics," ASSRU Discussion Papers 1206, ASSRU - Algorithmic Social Science Research Unit.
    9. Carl Chiarella & Peter Flaschel & Peiyuan Zhu, 2003. "Towards Applied Disequilibrium Growth Theory: IV Numerical Investigations of the Core 18D Model," Working Paper Series 96, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    10. Gardini, Laura & Radi, Davide & Schmitt, Noemi & Sushko, Iryna & Westerhoff, Frank, 2023. "Sentiment-driven business cycle dynamics: An elementary macroeconomic model with animal spirits," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 342-359.
    11. Proaño, Christian R., 2012. "Gradual wage-price adjustments, labor market frictions and monetary policy rules," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 220-235.
    12. Asada, Toichiro & Chiarella, Carl & Flaschel, Peter & Mouakil, Tarik & Proaño, Christian R., 2010. "Stabilizing an unstable economy: On the choice of proper policy measures," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 4, pages 1-43.
    13. Murakami, Hiroki, 2020. "Monetary policy in the unique growth cycle of post Keynesian systems," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 39-49.
    14. Toichiro Asada & Pu Chen & Carl Chiarella & Peter Flaschel, 2004. "Keynesian Dynamics and the Wage Price Spiral. A Baseline Disequilibrium Approach," Macroeconomics 0409001, University Library of Munich, Germany.
    15. Peter Flaschel & Hans-Martin Krolzig, 2003. "Wage and Price Phillips Curves An empirical analysis of destabilizing wage-price spirals," Economics Papers 2003-W16, Economics Group, Nuffield College, University of Oxford.
    16. Peter Flaschel & Reiner Franke & Willi Semmler, 2021. "Kaleckian Investment and Employment Cycles in Postwar Industrialized Economies," Working Papers 2103, New School for Social Research, Department of Economics.
    17. Pu Chen & Carl Chiarella & Peter Flaschel & Willi Semmler, 2006. "Keynesian Macrodynamics and the Phillips Curve. An Estimated Baseline Macromodel for the U.S. Economy," Working Paper Series 147, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    18. Christian R. Proaño & Peter Flaschel & Hans-Martin Krolzig & Mamadou Bobo Diallo, 2011. "Monetary policy and macroeconomic stability under alternative demand regimes," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 569-585.
    19. Toichiro Asada & Carl Chiarella & Peter Flaschel & Tarik Mouakil & Christian Proaño & Willi Semmler, 2011. "Stock‐Flow Interactions, Disequilibrium Macroeconomics And The Role Of Economic Policy," Journal of Economic Surveys, Wiley Blackwell, vol. 25(3), pages 569-599, July.
    20. Matthieu Charpe & Carl Chiarella & Peter Flaschel & Christian R. Proaño, 2014. "Business Confidence and Macroeconomic Dynamics in a Nonlinear Two-Country Framework with Aggregate Opinion Dynamics," Working Papers 1401, New School for Social Research, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:221:y:2024:i:c:p:586-601. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.