Asset Pricing Implications of Macroeconomic Interventions: An Application to Climate Policy
27 Pages Posted: 28 Jun 2013
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Asset Pricing Implications of Macroeconomic Interventions: An Application to Climate Policy
Asset Pricing Implications of Macroeconomic Interventions an Application to Climate Policy
Date Written: June 26, 2013
Abstract
This paper illustrates that evaluating alternate abatement polices that affect the growth path of an economy on the basis of their effects on asset valuation may not be welfare enhancing. We show that the class of abatement polices considered in the integrated assessment literature are robust with respect to the choice of a discount factor if lifetime consumption equivalents are used as a metric. We argue against a global welfare function in the presence of significant global household heterogeneity. While economic analysis is a useful tool for evaluating different policies for a homogenous class of households, inter household comparisons are an ethical issue.
Keywords: Asset Pricing, Climate Policy, Macroeconomic Interventions
JEL Classification: E44, E6, G00, G12, G31, H00, O1, Q54
Suggested Citation: Suggested Citation
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