Arbeitspapier
Capital reallocation under climate policy uncertainty
In a structural dynamic model that incorporates two broad production sectors with different carbon emissions, we find that climate policy uncertainty (CPU) shocks (i) lower the market value of the highly carbon-emitting sector relative to the low carbon-emitting sector, and (ii) reduce real investment and the capital stock in the highly carbon-emitting sector, while real investment in the sector with low carbon emissions tends to fare better. To apply the theoretical predictions to the data, we employ a news article-based measure of climate policy uncertainty to identify CPU shocks as well as quarterly balance sheet data of listed firms in the United States. In line with the predictions from the theoretical model, we find that in response to CPU shocks (i) financial markets markedly revalue strongly carbon-emitting firms relative to firms with low carbon emissions, and (ii) substantial investment reallocation takes place, in particular from the manufacturing sector towards services.
- ISBN
-
978-3-95729-954-3
- Sprache
-
Englisch
- Erschienen in
-
Series: Deutsche Bundesbank Discussion Paper ; No. 23/2023
- Klassifikation
-
Wirtschaft
Investment; Capital; Intangible Capital; Capacity
Financial Markets and the Macroeconomy
Climate; Natural Disasters and Their Management; Global Warming
Environmental Economics: Government Policy
- Thema
-
Climate policy uncertainty
production factor reallocation
firm-level investment decision
financial market valuation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Khalil, Makram
Strobel, Felix
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsche Bundesbank
- (wo)
-
Frankfurt a. M.
- (wann)
-
2023
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Khalil, Makram
- Strobel, Felix
- Deutsche Bundesbank
Entstanden
- 2023
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