Sensitivity and Stability: An Investigation of Stock-Flow Consistent Climate-Economic Models

We aim to investigate the stability of various stock-flow consistent economic models, and the potential causes for economic collapse therein. Through parameter sensitivity analysis, we study models that feature a public sector, an active central bank, and a household sector with independent consumption. Our final, most comprehensive economic system combines all of the intricacies of each model, prominently featuring a demand-driven economy that is stabilized by an expansionary monetary policy. In addition, we incorporate a climate module for each economic system, and analyze public sector intervention through carbon taxes and abatement subsidies. We find that the most common feature of economic instability is a lack of demand, driven by decreases in capital investment from firms, as well as a decline in household consumption. In order to maintain a stable growth path and prevent a permanent economic contraction, we propose the implementations of an expansionary monetary policy, increased public sector subsidies of abatement costs, and stricter carbon taxes.

Department dc:contributor.department

Mathematics and Statistics

Year dc:date.issued

2021

Author dc:creator

• Presta, Daniel M.

Advisors dc:contributor.advisor

• Grasselli, Matheus R.
• Bolker, Benjamin M.

• Economics, Stock-flow Consistent, Stability, Sensitivity, Climate Economics, Ecological Economics, Mathematical Economics, Jacobian Analysis, Differential Equations

Language dc:language.iso

en

Handle dc:identifier.uri

http://hdl.handle.net/11375/26810

OAI record oai:identifier

https://macsphere.mcmaster.ca/server/oai/request?verb=GetRecord&metadataPrefix=dim&identifier=oai%3Amacsphere.mcmaster.ca%3A11375%2F26810