제목50권 2호 Optimal Environmental Policy in a Small Open Economy Under a New Keynesian Framework
작성자admin조회수159날짜2023/12/01

Yongseung Jung1 ․ Doo Yong Yang2

Received: 8 September 2023 / Accepted: 20 Octboer 2023 /
Published online: 1 December 2023 Ⓒ Korean Social Science Research Council 2023

Abstract This paper analyzes the optimal environmental policy under the new Keynesian
environment. First, this paper conducts an empirical analysis using panel VAR. The results
show that a 10% reduction in carbon dioxide is associated with a 2% reduction in GDP. To
build a theoretical model, we next model the impact of the environment on economic activity in
a small open economy and analyze the impact of environmental policies under a new Keynesian
model. The results are as follows. First, optimized taxation should respond strongly to emissions
and output since the emission is procyclical and firms’ abatement efforts are procyclical,
dampening business cycle fluctuations. Second, environmental taxation should be levied on
domestic emission flows, not the overall stock of emissions, since it is more efficient and likely
to generate less macroeconomic volatility by inducing firms to reduce emissions and optimally
adjust their activities over time. Finally, the simple optimized environmental taxations show
that the environmental taxation policy should be aggressive and not tax-smoothing type since
the so-called tax-smoothing policy is welfare detrimental.
Keywords Envrionment Policy․Panel VAR․New Keynesian Model

6.Yongseung-Jung-Doo-Yong-Yang.pdf

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