Dynamic Stochastic General Equilibrium Models, Energy Policy, and Climate Change Adaptation

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Economics and Finance".

Deadline for manuscript submissions: closed (31 August 2024) | Viewed by 3431

Special Issue Editors


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Guest Editor
Department of Economics, School of Social Sciences, Swansea University, Swansea, UK
Interests: macroeconomics; monetary economics; business cycle analysis; economic growth

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Guest Editor
Department of Economics, University of Victoria, Victoria, BC, Canada
Interests: econometrics; applied macroeconomics; empirical finance
Cardiff School of Management, Cardiff Metropolitan University, Cardiff, UK
Interests: digital economy; circular economy; finanical innovation
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Special Issue Information

Dear Colleagues,

We are soliciting manuscripts for a Special Issue aiming to bring together new research in the field of macroeconomics, environment and energy economics.

External energy shocks have been a major force behind the recent increase in aggregate inflation. On the other hand, in the face of the increasing uncertainty about future prices which appears to be emanating from the supply side, policymakers tend to respond by raising the interest rate which tends to slow growth. Furthermore, conventional macroeconomic models employed for policy design often neglect the natural environment. What is the role of macroeconomic policy in combating climate change while maintaining economic stability? Understanding the relationship between the real activity and energy market volatility in an economy that interacts with environmental externalities is of significant relevance to policy and building capacity around crisis responses.

This Special Issue focuses on the broad topic of dynamic stochastic general equilibrium (DSGE) models and their implications for economic cycles and policy. It involves novel research and empirical findings on the use of DSGE models with an emphasis on the interactions between energy markets, climate policies and the aggregate economy. We invite submissions related to a wide array of topics within the framework of DSGE and quantitative economic analysis, including, but are not limited to, the propagation of energy shocks, forms of climate risks, technological, environmental and geo-political challenges, and appropriate policy measures to mitigate their adverse effects. Papers on broader topics such as monetary and fiscal policy, economic volatility, business cycles, growth, welfare, inflation and emissions, digital and environmental economics, and emerging markets are also welcome.

We look forward to receiving your submissions.

Dr. Bo Yang
Prof. Dr. Vasco J. Gabriel
Dr. Zheng Liu
Guest Editors

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Keywords

  • DSGE models
  • macroeconomics
  • energy markets
  • climate change
  • environmental externality
  • economic crises and growth
  • business cycles
  • stabilization policy
  • sustainable development

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Published Papers (2 papers)

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Research

15 pages, 1469 KiB  
Article
On the Effects of Physical Climate Risks on the Chinese Energy Sector
by Christian Oliver Ewald, Chuyao Huang and Yuyu Ren
J. Risk Financial Manag. 2024, 17(10), 458; https://doi.org/10.3390/jrfm17100458 - 9 Oct 2024
Viewed by 1104
Abstract
We examine the impact of physical climate risks on energy markets in China, distinguishing between traditional energy and new energy stock markets, and the energy commodity market, utilizing a time-varying parameter vector autoregressive model with stochastic volatility (TVP-SV-VAR). Specifically, we investigate the dynamic [...] Read more.
We examine the impact of physical climate risks on energy markets in China, distinguishing between traditional energy and new energy stock markets, and the energy commodity market, utilizing a time-varying parameter vector autoregressive model with stochastic volatility (TVP-SV-VAR). Specifically, we investigate the dynamic effects of five specific subtypes of physical climate risks, namely waterlogging by rain, drought, typhoon, cryogenic freezing, and high temperature, on WTI oil prices and coal prices. The findings reveal that these physical climate risks exhibit time-varying similar effects on the returns of traditional energy and new energy stocks, but heterogeneous effects on the returns of WTI oil prices and coal prices. Finally, we categorize and examine the impact of both acute and chronic physical risks on the energy commodity market. Full article
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20 pages, 382 KiB  
Article
From Brown to Green: Climate Transition and Macroprudential Policy Coordination
by Federico Lubello
J. Risk Financial Manag. 2024, 17(10), 448; https://doi.org/10.3390/jrfm17100448 - 4 Oct 2024
Viewed by 1444
Abstract
We develop a dynamic, stochastic general equilibrium (DSGE) model for the euro area that accounts for climate change-related risk considerations. The model features polluting (“brown”) firms and non-polluting (“green”) firms and a climate module with endogenous emissions modeled as a byproduct externality. In [...] Read more.
We develop a dynamic, stochastic general equilibrium (DSGE) model for the euro area that accounts for climate change-related risk considerations. The model features polluting (“brown”) firms and non-polluting (“green”) firms and a climate module with endogenous emissions modeled as a byproduct externality. In the model, exogenous shocks propagate throughout the economy and affect macroeconomic variables through the impact of interest rate spreads. We assess the business cycle and policy implications of transition risk stemming from changes in the carbon tax, and the implications of the micro- and macroprudential tools that account for climate considerations. Our results suggest that a higher carbon tax on brown firms dampens economic activity and volatility, shifting lending from the brown to the green sector and reducing emissions. However, it entails welfare costs. From a policy-making perspective, we find that when the financial regulator integrates climate objectives into its policy toolkit, it can minimize the trade-off between macroeconomic volatility and welfare by fully coordinating its micro- and macroprudential policy tools. Full article
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