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A climate–economy model in a stochastic differential equilibrium with fractional Brownian motions and Poisson jumps

Author

Listed:
  • Alastaire Sena Alinsato

    (University of Abomey-Calavi)

  • Kora Hafiz Bete

    (University of Abomey-Calavi)

  • Nassibou Bassongui

    (University of Abomey-Calavi)

Abstract

This paper introduces a new general equilibrium model involving climate change. More precisely, we used the theory of stochastic differential equations driven by fractional Brownian motion and the theory of jump processes to predict the climate–economy relationship. Through real data, we verified the new model’s effectiveness and accessed its prediction capacity through various simulations. The model provided good simulations of CO2 concentrations and other emissions, temperature dynamics and GDP. Besides, we found that climate change hurts global GDP around 2045 ceteris paribus. It proves to be more suitable for predicting the process in which memory reveals to be a relevant fact. Some policy implications are proposed to mitigate the anticipated impacts of the climate on the economy.

Suggested Citation

  • Alastaire Sena Alinsato & Kora Hafiz Bete & Nassibou Bassongui, 2023. "A climate–economy model in a stochastic differential equilibrium with fractional Brownian motions and Poisson jumps," SN Business & Economics, Springer, vol. 3(8), pages 1-23, August.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:8:d:10.1007_s43546-023-00512-6
    DOI: 10.1007/s43546-023-00512-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; Climate changes; Choleskii decomposition; Fractional Brownian motion; Poisson jumps;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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