Matlab Codes--Optimal Environmental Policy and Distortionary Fiscal Policy Interactions: A DSGE Perspective
Description
This set of codes replicates the quantitative results presented in the article, which examines the interplay between optimal environmental policy and distortionary fiscal policy within a dynamic stochastic general equilibrium (DSGE) framework. The codes implement the model’s calibration, solve for the Ramsey-optimal policies, and simulate the economy’s response to various environmental and fiscal shocks. The simulations illustrate how optimal carbon taxation and abatement efforts adjust in response to pollution, government spending, and productivity shocks. Researchers can use these codes to reproduce the findings, explore sensitivity analyses, or extend the framework to related policy questions.
Files
Steps to reproduce
Before running ramsey_moments.m and IRRs to plot the impulse responses, follow these steps: Run ramsey_f.m to generate the .mat file ramsey_f.mat. Run ramsey_ss.m, which computes the Ramsey steady state and creates ramsey_ss.mat. The initial condition is stored in X0, where X0(1) represents the the tax rate and X0(2) denotes the abatement rate. Run ramsey_run.m. Finally, execute ramsey_moments.m or IRRs. Sensitivity Analysis: To simulate the model with different parameter values, modify the structural_parameters.m subfunction in ramsey_ss.m. If changes in parameters significantly affect the Ramsey-optimal tax rate and abatement rate, you may need to adjust the initial condition X0 accordingly in ramsey_ss.m.