The Study of Green Tax Role on the Effectiveness of Monetary Policy in Iran's Economy with DSGE Approach

Document Type : Research Paper

Authors

1 Ph.D. Student in Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

2 Professor, Department of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

3 Assistant Professor, Department of Economics , Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

Abstract

Pollution and climate change affect countries' economies, especially by reducing total productivity factors. For this reason, the green tax, as the most direct and transparent climate control policy, has attracted the attention of economic policymakers. On the other hand, today, the role of climate change in the success of central banks in implementing monetary policy is also focused on. As a result, the question is raised of whether the effectiveness of the monetary policy in controlling inflation and the production gap increases with the presence of green tax. To answer this question, the E-DSGE model was designed to take into account macroeconomic and climate policy considerations at the same time. The results showed that monetary policy reduces the production gap caused by the climate crisis and controls the resulting inflation. The duration of the implementation of monetary policy does not differ in the presence or absence of the green tax. However, in terms of quantity, in the case where there is a green tax, the monetary policy is more efficient. However, if the green tax rate is large enough, monetary policy is more efficient in terms of time and quantity.

Keywords

Main Subjects

References

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