This paper examines the impact of internal and external resources on the adoption of eco-efficiency actions by European firms. The empirical analysis is based on an ordered logit model on data from the fifth wave of the Flash Eurobarometer survey (2021) for a sample of 9158 firms. We obtain three main results. First, we show that internal and external financial resources are positively correlated with firm eco-innovations, but the association with the former is stronger. Second, we observe a high degree of complementarity between public and private funds. Finally, besides financial resources, both in-house technical expertise and external non-financial assistance seem to play an important role for the implementation of eco-efficiency actions at the firm level. These findings have some relevant policy implications. European policy-makers should increase opportunities for public co-financing, while providing support to firms for developing the necessary competencies to enable green investments.

The monetary policy operations of a central bank (CB) involve allocation decisions when purchasing assets and taking collateral. A green monetary policy aims to steer or tilt the allocation of assets and collateral toward low-carbon industries, to reduce the cost of capital for these sectors in comparison to high-carbon ones. Starting from a corporate bonds purchase program (e.g., CSPP) that follows a carbon-neutral monetary policy, we analyze how a shift in the CB portfolio allocation toward bonds issued by low-carbon companies can favor green firms in the market. Relying on optimal portfolio theory, we study how the CB might include the risk related to the environmental sustainability of firms in its balance sheet. In addition, we analyze the interactions between the neutral or green CB re-balancing policy and the evolutionary choice (i.e., by means of exponential replicator dynamics) of a population of firms that can decide to be green or not according to bonds borrowing cost.

A dynamic model is proposed to describe the time evolution of production location choices of a multinational enterprise that can decide between two possible manufacturing locations: a stylized developed economy and a developing economy. The model is based on an evolutionary approach according to a replicator dynamics driven by expected profits. The production in each country is determined by the availability of labor inputs and their relative productivity, on wages of skilled and unskilled workers, as well as on cost externalities due to knowledge spillovers and public goods availability. The model includes the effects of relative demand and supply on earnings distribution with two different types of workers (high and low skilled) and the substitution between the two categories is captured by a CES aggregate production function. Behavioral parameters are also considered, such as the cognitive bias that overestimates the convenience of offshoring in term of labor cost and the “made in” effect that brings consumers to pay higher prices for products manufactured in a developed country.

This paper analyses an optimal monetary policy under a non-linear Phillips curve and linear GDP dynamics. A central bank controls the inflation and the GDP trends through the adjustment of the interest rate to prevent shocks and deviations from the long-run optimal targets. The optimal control path for the monetary instrument, the interest rate, is the result of a dynamic minimization problem in a continuous-time fashion. The model allows considering various economic dynamics ranging from hyperinflation to disinflation, sustained growth and recession. The outcomes provide useful monetary policy insights and reveal the dilemma between objectives faced by the monetary authority in trade-off scenarios.

In this paper, we study the dynamic relationship between the public debt ratio and the inflation rate. Using a non-linear macroeconomic model of difference equations, we analyze the role of monetary and fiscal policy in influencing the stability of the debt ratio and inflation. We get three main results. First, we find that, in a low inflation scenario, money finance can be helpful in stabilizing the debt ratio. Second, we show that in a dynamic setting, standard Taylor rules may not be sufficient to control inflation. The Central Bank’s credibility in driving inflation expectations is indeed crucial to control price developments and to achieve macroeconomic stability. Finally, an active budget adjustment rule has a stabilizing effect on the debt ratio, even if it may not be enough to avoid explosive patterns. Notably, the stability of the steady state depends on the fine-tuning of the policy mix. One of the novelties of our analysis is the presence of a threshold level for the debt ratio and inflation, beyond which the debt ratio becomes unsustainable following an explosive path. The distance between this threshold and the steady state can be considered a proxy of the robustness of the economy to exogenous shocks.