The EIRIN Flow-of-funds Behavioural Model of Green Fiscal Policies and Green Sovereign Bonds

By I. Monasterolo, Marco Raberto. 2018

212 citations recorded by the source corpus.

Fiscal and monetary policies, as well as new financial instruments, could play a key role to meet the Paris Agreement. However, deep uncertainty characterizes their design and their potential effects on growth, financial and credit market stability, and inequality. We develop the EIRIN flow-of-funds behavioural model to simulate the introduction of green fiscal policies and green sovereign bonds, and we display their effects on firms' investments in the brown and green sector, on unemployment, on the credit and bonds market. EIRIN is Stock-Flow Consistent and is rooted on a balance sheet approach. It adopts a Leontief production function with no substitution of the production factors, i.e., Labour, Capital, and Raw Materials. Its sectors are endowed with adaptive behaviours and expectations, and interact with the others and the foreign sector through a set of markets. Simulations show that green public policies can promote green growth by influencing firms’ expectations and the credit market. Green sovereign bonds represent a short-term win-win solution, while green fiscal measures have higher immediate distributive effects that induce negative feedbacks on the economy. These results are influenced by the conditions (fiscal, budgetary and public debt/GDP) in which both measures are implemented.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/8cea75473b7b5387f7b35ddaeb4f72f145505d93

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Citations in the corpus

A review of agent‐based modeling of climate‐energy policy (2020, background): “Other sideobjectives include minimizing distributive effects (Monasterolo & Raberto, 2018), encouraging employment (Rengs et al., 2020), maximizing long-term benefits compared to short-term costs (Ponta et al., 2016), or spurring technological innovation (Bleda & Valente, 2009; Isley et al., 2015).”
Modelling innovation and the macroeconomics of low-carbon transitions: theory, perspectives and practical use (2019, background): “Models that focus on money and finance follow this theoretical underpinning (e.g. Bovari, Giraud, & Mc Isaac, 2018; Dafermos, Nikolaidi, & Galanis, 2017; Lamperti, Dosi, Napoletano, Roventini, & Sapio, 2018; Mercure, Pollitt, Edwards, Holden, & Vinuales, 2018a; Monasterolo & Raberto, 2018).”
An agent-based stock-flow consistent model of the sustainable transition in the energy sector (2018, background): “In this respect, Monasterolo and Raberto (2018) propose the EIRIN flow-fund behavioral model with heterogeneous agents as a tool to simulate green fiscal and targeted monetary policies, displaying their effects on firms' investments, unemployment, wages, credit market and economic”
Uncertainty of climate policies and implications for economics and finance: An evolutionary economics approach (2019, background): “Then, finance can induce multiple equilibria or reinforce the gap between multiple equilibria due to the circularity between investments and investors’ expectations on climate risks and on the outcome of the policies (Battiston and Monasterolo 2018).”
Three green financial policies to address climate risks (2021, background): “, 2018; Battiston and Monasterolo, 2020a; Monasterolo, 2020), and (ii) the transition to low-carbon technologies and production (Campiglio, 2016; D’Orazio and Popoyan, 2019; Monasterolo and Raberto, 2018; Lamperti et al., 2019).”
Climate Change, Financial Stability and Monetary Policy (2018, unknown): “…Hines, 2010; Werner, 2012; Rozenberg et al., 2013; Anderson, 2015; Barkawi and Monnin, 2015; Campiglio, 2016; Matikainen et al., 2017; Volz, 2017; Monasterolo and Raberto, 2018), we examine the extent to which a global green quantitative easing (QE) programme could ameliorate the ﬁ nancial…”