Alessandro Notarpietro

“Green fiscal policy measures and non-standard monetary policy in the Euro Area”

Event description

Alessandro Notarpietro will present findings from his recent paper (with Anna Bartocci and Massimiliano Pisani), “Green fiscal policy measures and non-standard monetary policy in the Euro Area.”

From the abstract:

This paper evaluates the macroeconomic effects of increasing taxes on fossil fuels (“carbon tax”) and subsidies for renewable energy and reducing labor income tax in the euro area, and the interaction of these effects with domestic monetary policy. The tax increase is announced, gradually implemented and fully anticipated by agents (thus it is conceptually different from a sudden and unexpected positive shock affecting the international prices of fossil fuels). The analysis makes use of a New Keynesian two-country model with an energy sector, calibrated to the euro area and the rest of the world. The main results are the following. First, an increase in the carbon tax generates recessionary effects. Second, higher subsidies for green energy and a lower labor tax can limit the macroeconomic cost of increasing the carbon tax. Third, if the monetary policy rate is at its effective lower bound, the fiscal policy mix generates short-run recessionary effects, which can be offset if the central bank, for monetary policy purposes, purchases long-term sovereign bonds in the secondary market, thus keeping long-term interest rates low. 



Pierre Monnin
Senior Fellow, CEP

Alessandro Notarpietro

Alessandro Notarpietro is Head of the Models for Policy Analysis Unit in the Modelling and Forecasting Division at the Bank of Italy since 2022. Mr. Notarpietro joined the Bank of Italy in 2008 as the Directorate General for Economics, Statistics, and Research, where he has been an Economist in the Economic Outlook and Monetary Policy Directorate. In the academic year 2016-17, he was a visiting scholar in the Department of Economics of New York University, Stern School of Business. During 2020-21 he was co-lead of the Eurosystem workstream on Eurosystem Modelling, within the work related to the review of the ECB’s monetary policy strategy. His research interests cover macroeconomics, monetary and fiscal policy, and dynamic general equilibrium models. He holds a Ph.D. in Economics from Università Bocconi

Paper and slides

Green fiscal policy measures and non-standard monetary policy in the Euro Area (Paper)

Green fiscal policy measures and non-standard monetary policy in the Euro Area (Slides)



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