Cross-Border Financial Effects of Global Warming in a Two-Area Ecological SFC Model

Authors

Emilio Carnevali, University of Leeds, Economics Division; and Department for Work and Pensions, UK Government.
Matteo Deleidi, University College London, Institute for Innovation and Public Purpose; and Roma Tre University, Department of Economics.
Riccardo Pariboni, Roma Tre University, Department of Economics; and Freie Universität, Berlin.
Marco Veronese Passarella, University of Leeds, Economics DivisionFollow

Working Paper Number

2019-02

Publication Date

2019

Abstract

We develop an ecological open-economy SFC model that enables testing cross-area interactions among productive sectors, financial markets and the ecosystem. We show that the unequal technical progress across areas, coupled with rising ecological awareness, can force governments of less ecologically efficient areas to move further away from low-carbon assets. We argue that ‘green’ monetary and fiscal policies can be used to tackle climate change and financial instability. However, their effectiveness depends crucially on the impact of cross-border financial flows and growth rate differentials on exchange rates. Without a cross-area policy coordination plan, currency fluctuations can bring about unintended consequences, undermining green policies’ effects.

DOI

https://doi.org/10.7275/13949117

License

UMass Amherst Open Access Policy

Recommended Citation

Carnevali, Emilio; Deleidi, Matteo; Pariboni, Riccardo; and Veronese Passarella, Marco, "Cross-Border Financial Effects of Global Warming in a Two-Area Ecological SFC Model" (2019). UMass Amherst Economics Working Papers. 260.
https://doi.org/10.7275/13949117