Member of the macroeconomic modelling program GEMMES (GEneralized Monetary Macrodynamics

Multisectoral for the Ecological Shift) in the research department of the AFD.

Brazil: Partnership between AFD-IPEA (Research Institution in Applied Economics) on financing the energy

shift.

Ivory Coast: Paternership between AFD-CAPEC (Research laboratory in Economics) on modelling the informal economy and on assessing the impacts of commodity prices volatility on public finance.

Associate researcher, (ENS ULM, X, ENSAE)

Research topics: macroeconomic modelling, energy shift, finance, economy and climate interactions,

estimation and simulation of continuous-time stochastic processes, and system dynamics.

This paper employs the continuous-time ARMA process in the vein of Thornton and Chambers (2017) for a high dimensional cointegrated dataset. The dataset is built using the integrated economic accounts as the core source of information and multiple satellite data in order to capture meaningful macroeconomic signals (such as employment, interest rates, etc.). This technique allows differentiating the stock and flows nature of the data. Moreover, the inference of the macroeconomic model using mixed frequency data, meaning that the estimation could be complemented with financial data available at a higher frequency. This technique is applied to Brazil.

This paper follows Bovari et al. (2018)’s research program in testing the impact of carbon pricing in an economy that is characterized by a large proportion of informality. By coupling a climate model with a model that take private debt dynamics into account, Bovari et al. (2018) showed that putting together two sources of instability can lead to a very high probability of economic turmoil. However, they show that carbon pricing can reduce–or even alleviate–the risk of persistent economic recession at the cost of few percentage points of GDP in the short term. The primary goal of this paper is to incorporate additional properties to the core theoretical framework of Bovari et al. (2018), and take into consideration informal markets into the macroeconomic modelling. I show that the new model keeps the properties of Keen’s model is the economy is converging towards fully formal economic activity. However, I also demonstrate that economic activities are collapsing when the production sector has a high degree of informality. Finally, I propose an extension that includes a transfer of profit from the informal sector to the formal one. This choice is motivated by the consequences of a carbon pricing that leads to an upstream increase in global prices, and then by a redistribution of the collected taxes to the formal activities. Using numerical techniques, I conclude that such extension shows positive economic outcome as the market would transfer its activity towards more formal activities, allowing for more access to financial markets.