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GTAP Resource #6917

"Evaluating the economic and employment implications of GHG emission reductions using a CGE (GEM-E3) and a Macro-Econometric (GINFORS_E) model: The role of macro closures, finance and resource utilization rate."
by Fragkiadakis, Dimitris and Leonidas Paroussos

This paper discusses the mechanisms through which a neoclassical and a post-Keynesian economic model provide different insights to the same policy question. The study focusses on the structural differences of the two approaches (as they are reflected in the applied economic models) and provides suggestions on model improvements for both approaches. Focus is on the different insights the two models provide when they are used in assessing the impact of GHG mitigation policies. It is in many studies where Macro-econometric – Keynesian type models present positive impacts on GDP as the ambition to reduce emissions increases where neoclassical models present negative effects. This study is concerned in assessing the mechanisms through which this takes place using a policy relevant scenario.

The key factors driving the difference (in direction) of the model results are: i) the source of financing of the additional investments and ii) the rate of resource utilisation. In the default simulation of the GEM-E3 model the resources to finance the additional investments required to decarbonise the energy system are made available after cancelling part of the reference decided investment projects (crowding out). In GINFORS-E the additional financing is available as idle resources are assumed, hence the economy is benefited from a Keynesian demand boost effect. This finding is further verified when in GEM-E3 the additional financing is made available from a loan (future savings) that a central/world bank provides.

Resource Details (Export Citation) GTAP Keywords
Category: 2023 Conference Paper
Status: Published
By/In: Presented during the 26th Annual Conference on Global Economic Analysis (Bordeaux, France)
Date: 2023
Created: Fragkiadakis, D. (4/14/2023)
Updated: Fragkiadakis, D. (6/12/2023)
Visits: 236
- Dynamic modeling
- Climate change policy
- Econometric methods
- European Union

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