Sustainability, Government debt, Existence, Dynamic stability, Transitional dynamics, Two-country OLG model, F41, F43,

Economic systems are connected to the natural environment through a continuous flow of energy and materials. The production of economic wealth implies the use of natural resources and their transformation into goods (bound to become, at least partially, waste in the future), current waste (pollution) and low-valued energy (entropy). The scarcity of natural resources and the negative externalities arising from their use throughout the entire value chain are quite natural motivations for the current policy push towards a more dematerialized and a more circular economy. In this perspective, the EU seems to be approaching a new frontier in environmental policy. The main contribution of this paper is a qualitative assessment of a coordinated set of dematerialization policies, which aim at fostering the socially efficient use (and re-use) of virgin materials at firm level. The policy mix we propose envisages a green tax reform (GTR) with a material tax, which aims at shifting relative input prices in favour of labour and capital, and a policy of funding research and development activities in the area of resource efficiency. In order to support firms in their transition to higher material efficiency, we foresee targeted skill enhancement programmes. Finally, to prevent firms to shift towards less material-intensive production, potentially leading to lower output quality, we complete the policy mix with specific command-and-control measures, aiming at setting minimum quality standards for selected product categories. The qualitative assessment of this mix of policies relies on the four basic criteria of the economic policy analysis (effectiveness, efficiency, equity and feasibility). Since the EU is deeply integrated in the world economy, and it is a net importer of virgin resources, our policy evaluation necessarily takes an open-economy perspective. In this vein, the paper reviews the state of affairs of the major world countries (USA, Japan and China in particular) on this issue, and contextualizes the EU action in a global perspective.

Enthusiasm for the Circular Economy (CE) is widespread and overwhelming. However, confusion around its meaning and purpose still pervades the scientific debate. Our study has two objectives. The first one is to increase the theoretical clarity and the scientific relevance of this debate. An important step forward in this direction is the idea of economy's circularity, which we introduce following a critical re-visitation of CE's notion. The second objective is to study the environmental effects of circularity. Our notion of economy's circularity is theoretically rooted in the materials-energy balance model, and points to the presence of circular matter and energy flows in the economy. A major strength of this definition is the conceptual separation of circularity (as an economy's feature) from the strategies (e.g. recovery, remanufacturing, reusing…) for its implementation. On one hand, this separation prompts the construction of a coherent framework, which helps shed light on the entire debate. On the other hand, it paves the way towards a novel methodology for studying any type of circularity effect. Circularity effects are indeed the effects of circularity strategies. Since strategies are constantly evolving, this approach delivers an immediate result. Circularity effects are unavoidably ambiguous. With reference to the effects on the environment, we provide evidence for this ambiguity by accurately selecting and reviewing studies on various circularity strategies. In a policy perspective, our findings seriously challenge the idea of implementing circularity for the sake of circularity. Indeed, using circularity as an environmental policy may prove quite a daunting task.

This study investigates the nexus between financial market and real estate (RE) sector against the backdrop of ECB's unconventional monetary policy. A financial dynamic computable general equilibrium (DCGE) model is calibrated on the financial social accounting matrix (FSAM) of Italian economy. The findings confirm that the inclusion of financial intermediation into real economy affects the real estate sector's output, value added, and pricing.