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The EU faces the challenge to combine large and sustained investments to promote the transition towards a green, digital, and competitive Europe while maintaining fiscal sustainability. Based on a comprehensive literature review on the effects of fiscal rules and investment clauses on public finances, this in-depth analysis provides some guidance how higher public investments can be achieved by a targeted golden rule without harming fiscal sustainability in the EU fiscal framework. The study also discusses the role of investments in the current proposals of the European Commission on the reform of the EU Economic Governance.

The purpose of this paper was to find out the right policy-mix for macroeconomic stabilization in Tanzania. The paper employed the co-integration and error correction modeling approach to analyze the interaction effects of fiscal and monetary policies on macroeconomic stability. The results show that fiscal and monetary expansion characterized by high government expenditure and high broad money supply deteriorates macroeconomic stability, but fiscal and monetary expansion characterized by low tax buoyancy and low interest rate enhances macroeconomic stability. The results further indicate that fiscal and monetary tightening characterized by low government expenditure coupled with low broad money supply strengthens macroeconomic stability, but fiscal and monetary tightening characterized by high tax buoyancy and high interest rate weakens macroeconomic stability. Furthermore, the results reveal that fiscal expansion and monetary contraction characterized by high government expenditure and high interest rate improves macroeconomic stability, but fiscal expansion and monetary contraction characterized by low tax buoyancy accompanied by low broad money supply dampens macroeconomic stability. Moreover, the results show that fiscal contraction and monetary expansion characterized by low government expenditure and low interest rate impairs macroeconomic stability, but fiscal contraction and monetary expansion characterized by high tax buoyancy coupled with high broad money supply drives macroeconomic stability. Lastly and more importantly, the study found that out of all policy-mix options and strategies under investigation, the right policy-mix is fiscal contraction and monetary expansion characterized by high tax buoyancy and high broad money supply. The policy implication of the findings is that in order to stabilize macroeconomic environment in Tanzania, fiscal and monetary authorities have to widen both tax base and monetary base.

The purpose of this paper was to find out the right policy-mix for macroeconomic stabilization in Tanzania. The paper employed the co-integration and error correction modeling approach to analyze the interaction effects of fiscal and monetary policies on macroeconomic stability. The results show that fiscal and monetary expansion characterized by high government expenditure and high broad money supply deteriorates macroeconomic stability, but fiscal and monetary expansion characterized by low tax buoyancy and low interest rate enhances macroeconomic stability. The results further indicate that fiscal and monetary tightening characterized by low government expenditure coupled with low broad money supply strengthens macroeconomic stability, but fiscal and monetary tightening characterized by high tax buoyancy and high interest rate weakens macroeconomic stability. Furthermore, the results reveal that fiscal expansion and monetary contraction characterized by high government expenditure and high interest rate improves macroeconomic stability, but fiscal expansion and monetary contraction characterized by low tax buoyancy accompanied by low broad money supply dampens macroeconomic stability. Moreover, the results show that fiscal contraction and monetary expansion characterized by low government expenditure and low interest rate impairs macroeconomic stability, but fiscal contraction and monetary expansion characterized by high tax buoyancy coupled with high broad money supply drives macroeconomic stability. Lastly and more importantly, the study found that out of all policy-mix options and strategies under investigation, the right policy-mix is fiscal contraction and monetary expansion characterized by high tax buoyancy and high broad money supply. The policy implication of the findings is that in order to stabilize macroeconomic environment in Tanzania, fiscal and monetary authorities have to widen both tax base and monetary base.

The study focuses on the impact exerted on private R&D expenditures by regular and innovative public procurement when taken in combination or insolation with supply-push measures. The econometric analysis relies on a pulled sample of 4206 Italian manufacturing firms observed between 2010 and 2014. The empirical exercise confirms previous evidences on the relevance of technology-push instruments in sustaining firms’ innovativeness. On the contrary, the ability of public procurement activities in shaping innovative investments is found to depend on a number of instances related to: (i) the adoption of contemporaneous supply side measures; (ii) the inclusion of innovative demand in procurement contracts. The analysis provides important suggestions with respect to the potential effectiveness of demand-side tools when implemented in weak administrative and innovation systems, as in the Italian case. Moreover, it is shown that the design of the policy mix matters, and its effectiveness improves when demand-side and supply-side instruments are jointly implemented.

Grundtræk i den svenske Rehn-Meidner-model genfindes i aktiv arbejdsmarkedspolitik fra 1990´erne. Forslag til en ny offensiv arbejdsmarkedspolitik for 2020´erne fremsættes.

The aim of this thesis is to examine the implications of structural heterogeneities in the policy framework of the euro area. The first step is to analyse the extent to which structural heterogeneities and the introduction of a financial stability objective assigned to the central bank influence the coordination of monetary and fiscal authorities as well as the economic stabilization that follows after shocks. Noteworthy is the increasing relevance of coordination with the degree of heterogeneity on the one hand and a proactivity of the central bank on the other hand, which improve / corrupts cyclical stabilization according to the type of shock after a financial stability objective has been added. Next step is to examine the fiscal reaction functions in the euro area to demonstrate the heterogeneity of government fiscal behavior on the one hand and the determinants of these fiscal policies on the other. Finally, we look at the impact of the single monetary policy on the euro area Member States and highlight a completely heterogeneous transmission of monetary policy, caused in particular by structural heterogeneities in productive specializations, functioning of financial and labor markets, just to name a few. Here, we ask about the relevance of single monetary policy in the context of heterogeneous monetary union without any mechanism of adjustment.; Cette thèse a pour objectif d’étudier l’implication des hétérogénéités structurelles dans le cadre des politiques économiques de la zone euro. Nous étudions d’abord dans quelles mesures ces hétérogénéités et l’introduction d’un objectif de stabilité financière attribué à la banque centrale affectent la stabilisation conjoncturelle suite aux chocs et la coordination entre les autorités monétaires et budgétaires. Nous montrons la pertinence croissante de la coordination avec le degré d’hétérogénéité et la pro-activité de la banque centrale suite à l’ajout de l’objectif de stabilité financière qui améliore/dégrade la stabilisation conjoncturelle selon le type de choc. Ensuite, nous étudions des fonctions de réaction budgétaire nationales qui démontrent l’hétérogénéité des comportements budgétaires des gouvernements et les différents déterminants des politiques budgétaires. Enfin, nous mettons en évidence l’impact hétérogène de la politique monétaire unique sur les pays membres. Ceci s’explique notamment par des caractéristiques structurelles hétérogènes dans les spécialisations productives, dans le fonctionnement des marchés financiers, marchés du travail etc. De même, nous posons la question de la pertinence d’une politique monétaire unique dans le cadre d’une union monétaire hétérogène, en l’absence de mécanisme d’ajustement.

Article, 大阪府立大学經濟研究. 2010, 56(1), p.59-63

The results from a simulation analysis of the policy-mix have been presented, carried out in a fiscal-monetary game, in which fiscal and monetary authorities make decisions from the point of view of realizing their own respective economic objectives. In order to represent the interrelations between, on the one hand, the instruments of fiscal policy and of monetary policy, and, on the other hand - the economic effects resulting from their application, a modified logistic function was used. The method adopted enables consideration of the specificity of the effects of these instruments on the business cycle, consisting in the limited effectiveness of applying any extremely restrictive or expansive policy, and the respective impact on the economy. The simulation study was meant to show the influence exerted both by the parameters of the function and the priorities of the fiscal and monetary authorities on the Nash equilibrium state, corresponding to the choice of a particular combination of budgetary and monetary policies. (original abstract)

Many studies have underlined the conflict of goals between European economic authorities after a negative supply shock : monetary policy is restrictive to preserve price stability, whereas fiscal policies are expansive to sustain economic activity. Our study extends this result to the consequences of structural heterogeneity between member countries of a monetary union. In a union, monetary-policy tightness depends on transmission channels, which are clearly heterogeneous. In certain short-term and structural configurations – in particular for countries of very different size – structural heterogeneity can accentuate the conflict of goals between the central bank and the governments ; it can also aggravate the escalation of interest-rate hikes and excessive public deficits., De nombreuses études ont souligné le conflit d’objectifs entre les autorités économiques européennes suite à un choc d’offre négatif : la politique monétaire est restrictive pour préserver la stabilité des prix et les politiques budgétaires expansives pour soutenir l’activité économique. L’objectif de ce papier est d’étendre ce résultat aux conséquences de l’hétérogénéité structurelle entre les pays membres d’une union monétaire. Le caractère restrictif de la politique monétaire dépend alors des canaux de transmission qui apparaissent hétérogènes. Et dans certaines configurations conjoncturelles et structurelles, en particulier pour des pays aux tailles très différentes, l’hétérogénéité structurelle peut accentuer le conflit d’objectifs entre la banque centrale et les gouvernements et aggraver la surenchère de hausses des taux d’intérêt et de déficits publics excessifs., Menguy Séverine. Hétérogénéité structurelle des pays membres et conflit d’objectifs entre les autorités économiques dans l'UEM. In: Économie & prévision, n°169-171, 2005-3-5. pp. 41-58.

Eine undisziplinierte Haushaltspolitik der Mitgliedstaaten der EWU überfordert mittel- und langfristig die gemeinsame Geldpolitik in der Eurozone. Gleichzeitig geht jener Spielraum für eine nahezu „automatische“ Stabilisierung der Gesamtnachfrage verloren, der von konjunkturbedingten Defiziten und Überschüssen der nationalen Staatsbudgets auszugehen vermag. Wie stehen die Chancen für einen effektiven und effizienten Policy Mix zwischen der Geldpolitik der Europäischen Zentralbank und der nationalen Finanzpolitik der Mitgliedsländer?

Die von der Bundesregierung - jüngst im Rahmen des Energiekonzepts und der sog. Energiewende verkündeten - Zielvorgaben verdeutlichen, dass fundamentale Strukturveränderungen im Energiesystem, eine weitgehende Abkehr von kohlenstoffintensiven fossilen Energieträgern und ein mittelfristiger Verzicht auf Kernenergie angestrebt werden. Diese Studie untersucht die Koordination von Innovations-, Energie- und Umweltpolitik. Ohne eine derartige Koordination droht ein Verlust an Effektivität - die Ziele werden nicht erreicht -, ein Verlust an Effizienz - v.a. in Form unnötiger Kosten - und gegebenenfalls weitere unerwünschte Nebenwirkung (z.B. ungünstige Verteilungswirkungen). Interaktionen können sich v.a. dann ergeben, wenn mehrere Instrumente mehrere, aber nicht unabhängige Politikziele verfolgen, oder mehrere Instrumente für erforderlich gehalten werden, um verschiedene Formen von Markt- oder Koordinationsversagen zu begegnen. Die zunehmend wahrscheinliche Interaktion zwischen Politiken kann unterschiedliche Wirkungen haben: Instrumente können sich ergänzen und gegenseitig verstärken, sich aber auch neutralisieren oder gar konterkarieren und so wiederum Politikziele und ihre Glaubwürdigkeit unterminieren. Mit zunehmender Zahl von Instrumenten und Überlappungen steigt die Wahrscheinlichkeit von regelrechten „Politikstaus“ und unerwarteten Nebenwirkungen. Bisher haben derartige Politikinteraktionen noch vergleichsweise wenig Beachtung gefunden. Vor allem in der Ökonomie vorherrschend sind Analysen zu einzelnen Instrumenten oder einfache Instrumentenvergleiche. Aufgabe dieses Projektes ist es daher, auf der Basis einer Bestandsaufnahme zur Entwicklung der Politikfelder verschiedene Formen von Interaktionen zwischen Innovations-, Energie- und Umweltpolitik vor dem Hintergrund der Transformation des Energiesystems zu erfassen, ihre Wirkungen zu beschreiben, zu analysieren und zu bewerten und Implikationen für eine effektive und effiziente Koordination der Politiken zu ziehen

This article constitutes a new contribution to the analysis of overlapping instruments to cover the same emission sources. Using both an analytical and a numerical model, we show that when the risk that the CO2 price drops to zero and the political unavailability of a CO2 tax (at least in the European Union) are taken into account, it can be socially optimal to implement an additional instrument encouraging the reduction of emissions, for instance a renewable energy subsidy. Our analysis has both a practical and a theoretical purpose. It aims at giving economic insight to policymakers in a context of increased uncertainty concerning the future stringency of the European Emission Trading Scheme. It also gives another rationale for the use of several instruments to cover the same emission sources, and shows the importance of accounting for corner solutions in the definition of the optimal policy mix. Highlights : - We develop an analytical and a numerical model of the EU energy and carbon markets. - We add uncertainty on energy demand and focus on instruments for emission reduction. - We analyze the economic implications of a risk that the CO2 price drops to zero. - We show that it can be socially optimal to add an instrument to the EU-ETS., Cet article constitue une nouvelle contribution à l'analyse des combinaisons d'instruments cou¬vrant les mêmes sources d'émission. En utilisant à la fois un modèle analytique et un modèle nu¬mérique, nous montrons que lorsque le risque que le prix du CO2 tombe à zéro et l'absence de taxe carbone (au moins dans l'Union européenne) sont pris en compte, il peut être socialement optimal de mettre en place un instrument supplémentaire pour encourager la réduction des émissions, par exemple une subvention aux énergies renouvelables. Notre analyse a à la fois une finalité pratique et une finalité théorique. Elle vise à donner un aperçu économique des enjeux pour les décideurs politiques dans un contexte d'incertitude accrue concernant la contrainte d'émission. Elle donne également une nouvelle justification pour utilier plu¬sieurs instruments pour couvrir les mêmes sources d'émissions, et montre l'importance de la prise en compte de solutions en coin dans l'étude des portefeuilles optimaux d'instruments.

The 'right' choice of instruments and modalities to provide aid to developing countries in support of poverty reduction and economic development is arguably the most contested issue in the current international debate on aid effectiveness. A particular controversy exists around the provision of aid in the form of budget support to avoid high transaction costs and other shortcomings of traditional project-based aid. Critics argue that this kind of 'programme aid' involves unacceptably high fiduciary risks due to the fungibility of budgetary funds. A more recently proposed form of aid is in the form of results-based aid or aid on delivery. Proponents argue that this provides donors with better control over the use of aid resources. This paper demonstrates in a simple principal-agent framework with asymmetric information that in the absence of transaction costs, for a wide range of combinations of aid dependency and recipient government commitment to reduce poverty, all three forms of aid are equivalent with regard to fungibility and fiduciary risks. The paper proceeds to demonstrate that as long as donors can rely on the recipient government to be at least minimally committed to poverty reduction, a well co-ordinated modality mix of general budget support and aid on delivery does not bear higher fiduciary risks than project aid. It concludes that if project aid does indeed involve higher transaction costs than budget support, donors should provide aid in the form of such a modality mix, albeit only if they are able (and willing) to closely co-ordinate their support.

We develop a simple model of banking regulation with two policy instruments: minimum capital requirements and supervision of domestic banks. The regulator faces a trade-off: high capital requirements cause a drop in the banks'; profitability, while strict supervision reduces the scope of intermediation and is costly for taxpayers. We show that the expected costs of a banking crisis are minimised with a mix of both instruments. Once we allow for cross-border banking, the optimal policy is not feasible. If domestic supervisory effort is not observable, our model predicts a race to the bottom in banking regulation. Therefore, countries are better off by harmonising regulation on an international standard.

We develop a new set of indexes of exchange rate stability, monetary policy independence, and financial market openness as the metrics for the trilemma hypothesis. In our exploration, we take a different and more nuanced approach than the previous indexes developed by Aizenman, Chinn, and Ito (2008). We show that the new indexes add up to the value two, supporting the trilemma hypothesis. We locate our sample economies' policy mixes in the famous trilemma triangle - a useful and intuitive way to illustrate the state and evolution of policy mixes. We also examine if the persistent deviation of the sum of the three indexes from the value two indicates an unsustainable policy mix and therefore needs to be corrected by economic disruptions such as economic and financial crises. We obtain several findings. First, such a persistent deviation can occur particularly in emerging economies that later experience an inflation (or potentially a general or a currency) crisis, and dissipates in the postcrisis period. Second, there is no evidence for this type of association between deviations from the trilemma constraint and general, banking, or debt crises. Third, Thailand experienced such a deviation from the trilemma constraint in the period leading to the baht crisis of 1997, but not other East and Southeast Asian economies. This last result suggests that the main cause for the Thai baht crisis was an unsustainable policy mix in the precrisis period, while other affected economies experienced crises mainly due to contagion from Thailand.

Der Forschungsbericht befasst sich mit der Neuausrichtung der arbeitsmarktpolitischen Instrumente, die zum 1. Januar 2009 in Kraft getreten ist. Der Gesetzgeber verfolgte mit dieser Reform das Ziel, das Portfolio an Instrumenten zu straffen und damit transparenter und übersichtlicher zu gestalten. Darüber hinaus sollten im Bereich der Arbeitsvermittlung Gestaltungsspielräume für Agenturen und Vermittler vor Ort erhöht werden. Die Autoren gehen vor allem den Fragen nach, ob es gelungen ist, diese Handlungsspielräume zu schaffen und welche Umsetzungscharakteristika dabei von Bedeutung sind. Dazu wurden an 14 Standorten - d.h. bei sechs Agenturen für Arbeit, sechs ARGEn und zwei zugelassenen kommunalen Trägern - Experteninterviews mit Vermittlerinnen und Vermittlern, Teamleiterinnen und Teamleitern sowie Mitgliedern der Geschäftsführung geführt. Auf der Basis des methodischen Konzepts des wissenschaftlichen Quellentextes wurden die Experteninterviews anschließend analysiert. Empirisch zeigt sich dabei, dass die Neuausrichtung keine gravierenden Veränderungen bewirkt hat, was die arbeitsmarktpolitischen Maßnahmen betrifft; das sog. Vermittlungsbudget nach § 45 stellt hingegen eine Neuerung dar. Als schwierig erweist sich im konkreten Arbeitsalltag besonders der Zielkonflikt zwischen Regelorientierung und einem hohen Maß an autonomer Entscheidung auf den unteren Ebenen. Dabei spielen sog. Ermessenslenkende Weisungen eine wichtige Rolle, weil sie oft Regelungen beinhalten, die bereits vor der Instrumentenreform galten. Abschließend ist bemerkenswert, dass die sog. Freie Förderung nach §16f SGB II offenbar eine weit geringere Rolle als zuvor spielt. This paper deals with the strategic reorientation concerning the instruments of active labor market policy in Germany which came into force at January 1st 2009. The main objective of this reform was to streamline the portfolio of existing instruments and make it more transparent and clearly structured. Moreover, caseworkers in local job offices are to be granted more discretion and flexibility than prior to the reforms. The authors address the question whether the implementation of more discretionary power was successful, and which of the implementation's characteristics prove to be crucial for attaining this goal. To this purpose, expert interviews with caseworkers, their superior officers (team leaders) and members of the board were conducted in 14 local job offices. The study is based on the methodological concept of the socalled scientific source text (wissenschaftlicher Quellentext) which was used to analyze and interpret the interviews. Empirically, the authors find that the reform did not induce fundamental changes concerning the instruments of active labor market policy while the special budget for the support of job search activities (Vermittlungsbudget) according to § 45 SGB III can be regarded as an innovation. Caseworkers especially stress the conflict between compliance to the rules and the considerable autonomy involved in the everyday practice of street-level bureaucrats. Rules aimed at structuring discretional leeway in the local job offices (so-called Ermessenslenkende Weisungen) help define the relative concept of discretion, because they include instructions already valid before the reforms. Finally, it is remarkable to note that § 16f SGB II does not play an important role after the reform.

This article aims to suggest a research agenda that reconciles the macroeconomic policy with the development policy. It starts with the structural analysis of Brazilian economy in historical perspective and identifies the structural constraints to economic development in Brazil. The current monetary policy in the last ten years is also analyzed and identified as a constraint to the economic development, in the sense that it has been the dominant dimension in macroeconomic setting, subordinating all other goals of economic policy to price stability. Finally, search paths are pointed in the direction of macroeconomic and institutional arrangements considering the coordination of economic policies as a development strategy. This strategy should priories the full employment and high growth rates, consistently to a robust balance of payments and the stability of prices.

We investigate conditions that aggravate market failures in energy innovations, and suggest optimal policy instruments to address them. Using an intertemporal general equilibrium model we show that 'small' market imperfections may trigger a several decades lasting dominance of an incumbent energy technology over a dynamically more efficient competitor, given that the technologies are very good substitutes. Such a 'lock-in' into an inferior technology causes significantly higher welfare losses than market failure alone, notably under ambitious mitigation targets. More than other innovative industries, energy markets are prone to these lock-ins because electricity from different technologies is an almost perfect substitute. To guide government intervention, we compare welfare-maximizing technology policies in addition to carbon pricing with regard to their efficiency, effectivity, and robustness. Technology quotas and feed-in-tariffs turn out to be only insignificantly less efficient than first-best subsidies and seem to be more robust against small perturbations.

The combination of emissions trading and emissions taxes is usually rejected as redundant or inefficient. This conclusion is based on the restrictive assumption that both policies are exclusively meant to control pollution. However, particularly taxes may pursue a variety of other policy objectives as well, such as raising fiscal revenues or promoting equity. Multiple objectives may justify multiple policies. In this case, welfare losses with respect to pollution control may be traded off by benefits from attaining other policy objectives. Consequently, pragmatic policy recommendations have to be based on an in-depth understanding of interactions in the policy mix. This article makes three contributions that are relevant in this respect. (1) The most important factors distorting pollution abatement under the policy mix are identified. This insight is required to estimate the actual extent of inefficiency in controlling pollution, and to compare it with benefits of attaining other objectives of the tax. (2) The policy mix is not only compared to the unrealistic ideal of an efficient single emissions trading scheme but also to a suboptimal heterogeneous emissions tax. It is shown that if the tax is required to address multiple policy objectives, the implementation of an emissions trading scheme in addition may in fact increase the efficiency of pollution control. (3) It is demonstrated that welfare losses can be minimized within a policy mix by modifying emissions trading design.

This paper studies the implications for climate policy of the interactions between environmental and knowledge externalities. Using a numerical analysis performed with the hybrid integrated assessment model WITCH, extended to include mutual spillovers between the energy and the non-energy sector, we show that the combination between environmental and knowledge externalities provides a strong rationale for implementing a portfolio of policies for both emissions reduction and the internalisation of knowledge externalities. Moreover, we show that implementing technology policy as a substitute for stabilisation policy is likely to increase global emissions.

This paper provides a formal survey of price and quantity instruments for mitigating global warming. We explicitly consider policies' impact on the incentives of resource owners who maximize their profits intertemporally. We focus on the informational and commitment requirements of the regulator. Furthermore, we study the interplay between (private) resource extraction rent and (public) climate rent and ask how property and management of the climate rent can be assigned between regulator and resource sector. There are only two instruments that unburden the regulator from the complex intertemporal management of the climate rent and associated commitment problems: in the cost-benefit world, we derive a stock-dependent tax rule; in the cost-effective (carbon budget) world, only an emissions trading scheme with free banking and borrowing can shift intertemporal timing decisions completely to the market.

We study the importance of uncertainty and public finance to the welfare ranking of three environmental policy instruments: pollution taxes, pollution permits and Kyoto-like numerical rules for emissions. The setup is the basic stochastic neoclassical growth model augmented with the assumptions that pollution occurs as a by-product of output produced and environmental quality is treated as a public good. To compare alternative policies, we compute welfare-maximizing values for the second-best policy instruments. We find that, in all cases studied, pollution permits are the worst policy choice, even when their revenues finance public abatement. When the main source of uncertainty is economic, the most efficient recipe is to levy pollution taxes and use the collected tax revenues to finance public abatement. However, when environmental uncertainty is the dominant source of extrinsic uncertainty, numerical rules, being combined with tax-financed public abatement, are better than pollution taxes.

In the last months, the world’s economies were confronted with the largest economic recession since the Great Depression. The occurrence of a worldwide financial market meltdown as a consequence originally stemming from of the crisis in the US subprime housing sector was only prevented by extraordinary monetary and fiscal policy measures implemented at the international level. Although the world economy seems now to be slowing recovering, it is worthwhile exploring the fragility and potentially destabilizing feedbacks of advanced macroeconomies in the context of Keynesian macro models. Fragilities and destabilizing feedback mechanisms are known to be potential features of all markets—the product markets, the labor market, and the financial markets. In this paper we focus in particular on the financial market. We use a Tobin-like macroeconomic portfolio approach, and the interaction of heterogeneous agents on the financial market to characterize the potential instability of the financial markets. Though the study of the latter has been undertaken in many partial models, we focus here on the interconnectedness of all three markets. Furthermore, we also study how labor market, fiscal and monetary policies can stabilize unstable macroeconomies. Besides other stabilizing policies we in particular propose a countercyclical monetary policy that sells assets in the boom and purchases assets in recessions. Modern stability analysis is brought to bear to demonstrate the stabilizing effects of those suggested policies.

We analyse optimal environmental policies in a market that is vertically differentiated in terms of the energy efficiency of products. Considering energy taxes, subsidies to firms for investment in more eco-friendly products, and product standards, we are particularly interested in how distributional goals in addition to environmental goals shape the choice of policy instruments. Surprisingly, we find that an industry-friendly government levies an energy tax to supplement a lax product standard, but shies away from subsidies to firms. By contrast, a consumer-friendly government relies heavily on a strict product standard and in addition implements a moderate subsidy to firms, but avoids energy taxes.

Much of the literature on externalities has considered taxes and direct regulation as alternative policy instruments. Both instruments may in practice be imperfect, reflecting informational deficiencies and other limitations. We analyse the use of taxes and regulation in combination, to control externalities arising from individual consumption behaviour. We consider cases where taxes are either imperfectly differentiated to reflect individual differences in externalities, or where some consumption escapes taxation. In both cases we characterise the optimal instrument mix, and show how changing the level of direct regulation alters the optimal externality tax.

The usually assumed two categories of costs involved in climate change policy analysis, namely abatement and damage costs, hide the presence of a third category, namely adaptation costs. This dodges the determination of an appropriate level for them. Including adaptation costs explicitly in the total environmental cost function allows one to characterize the optimal (cost minimizing) balance between the three categories, in statics as well as in dynamics. Implications are derived for cost benefit analysis of adaptation expenditures.

The world is experiencing its worst recession in 80 years. What started as US sub-prime financial turmoil has developed into the first global recession since the infamous 'Great Depression' of the early 1930s. However gloomy the perspectives for the very short term are, there will be a recovery eventually. South Africa, Brazil and Turkey (SABT) are among those countries that may be expected as emerging market economies (EME) not only to continue to converge towards per-capita income levels of highly developed nations but also to be the best candidates - next to China and India - of serving as the locomotives of world GDP- and trade growth after the depression. Of course, whether SABT are not merely potentially in a position to create a brighter future for their people and the world economy but can transform such potentials into reality, depends on economic governance pursued by governments and collective actors in these countries. Therefore, it appears interesting to inquire into the macroeconomic governance structures of SABT in order to assess their capabilities for enhancing growth and employment and to converge to the OECD average in the medium to long run.

In the absence of a broad international agreement, national climate policies NEWLINE are less efficient, due to carbon leakage, and more costly, due to causing NEWLINE unemployment and a loss of competitiveness on international markets. As, NEWLINE in many countries, a substantial fraction of emissions results from the production NEWLINE of intermediate goods, such as electricity or transportation services, NEWLINE we investigate whether the above negative side-effects can be addressed by NEWLINE a policy mix that (partially) contains the effects of climate policy to the intermediate NEWLINE goods sector. We use a four-sector general equilibrium model to NEWLINE study a policy mix that consists of taxing emissions and subsidizing the intermediate NEWLINE good. We show that such containment is a second-best approach NEWLINE to combat carbon leakage and to maintain a favorable international market NEWLINE position. Also, it can help to reduce climate-policy-induced unemployment.

With interest rates in most developed countries close to zero, it is not possible for monetary policymakers to stimulate the economy by reducing interest rates. As a result the economy is unusually sensitive to the possibility of deflation, and thoughts turn to fiscal policy in order to stabilize output and prices. This paper summarizes the current academic debate on the role of fiscal policy under current conditions. In particular, this paper argues that policymakers need to be explicit about their objectives concerning spending, debt, and inflation, to avoid expectations-driven fluctuations in output and inflation.

We study the incidence of carbon-reduction and green-energy promotion policies in a general equilibrium small open economy that depends on imports of fossil fuels. The focus is on mixed policies that are either price based (emissions taxes and producer price subsidies for green energy) or quantity based (schemes of trading emissions and green certificates). Policy instruments directed head-on toward promoting green energy are shown to also reduce carbon emissions and vice versa but the direct effects are stronger than the side effects, the more so, the greater is the elasticity of substitution in consumption between energy and consumption goods. We calculate the effects of variations in individual policy parameters on all endogenous variables, among them the energy price and the welfare costs. We also determine the impact of exogenous fossil-fuel price shocks on the economy.

Currently, many monetary and fiscal policy measures are aimed at preventing the financial market meltdown that started in the US subprime sector and has spread worldwide as a great recession. Although some slow recovery appears to be on the horizon, it is worthwhile exploring the fragility and potentially destabilizing feedbacks of advanced macroeconomies in the context of Keynesian macro models. Fragilities and destabilizing feedback mechanisms are known to be potential features of all markets — the product markets, the labor market, and the financial markets. In this paper we in particular focus on the financial market. We use a Tobin-like macroeconomic portfolio approach, and the interaction of heterogeneous agents on the financial market to characterize the potential for financial market instability. Though the study of the latter has been undertaken in many partial models, we focus here on the interconnectedness of all three markets. Furthermore, we study the potential that labor market, fiscal and monetary policies have to stabilize unstable macroeconomies. Besides other stabilizing policies we in particular propose a countercyclical monetary policy that sells assets in the boom and purchases assets in recessions. Modern stability analysis is brought to bear to demonstrate the stabilizing effects of those suggested policies.

We model EU-type carbon emissions control in a group of countries to explore the distributional incidence of mixed policies that consist of an emissions trading scheme (ETS) and of emissions taxes overlapping with the ETS. Such policies impact on national welfares through both the overlapping taxes and the distribution of national emissions caps. Our main proposition is an equivalence result stating that for every mixed policy, there exists an ETS policy without overlapping taxes yielding the same levels of national welfare as the mixed policy. We also suggest two measures of the net distributional incidence of mixed policies.