Environmental Regulation And Macroeconomic Fluctuations

Nowadays the green development becomes an important issue in China.Recently,the negative impact of pollution on economic and social welfare has begun to emerge.The environmental resources consumption and pollutant emissions nearly surpass the environmental capacity.The economic is always under various uncertainties,and the emission is related to business cycles.How to solve environmental problems while ensuring economic security is an important topic.The development of environmental macroeconomics provides new tools for us.Some scholars study environmental regulation from a view of fluctuations.However,most of them ignore that there are different industries in reality.We improved previous E-DSGE models in the literature to make it more realistic.We use a new Keynesian DSGE model with industrial heterogeneity.Our model includes three parts:family,manufacturers and government.The manufacturers are in connected different industries,and their ability to emit pollution varies.Each industry is made up of many Monopolistic competitors.They produce product which is used in the final consumption,middle input and the government consumption.Also,they emit pollution as a by-product.Household derives their utility from different products,and work in various industries.In addition to the monetary policy and taxes,the government will implement environmental policies to regulate manufacturers.We use the data of our country to calibrate parameters in the model,and carries out some numerical simulation analysis to discuss the influence of environmental policy.We can see that the environmental policy can produce good effect on environment,but also impact on macro economy.There are differences in the impact of the environment policy on economic fluctuation when shocks are from different industries.