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In this work, we propose a methodology to quantify systemic risk derived from asset commonality and we apply it to assess the degree of indirect interconnection of banks due to their ﬁnancial holdings. This indirect interconnection may occur when ﬁnancial institutions invest in similar or correlated assets and is also described as overlapping portfolios.

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JEL Code D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government PolicyĪbstract One important source of systemic risk can arise from asset commonality among ﬁnancial institutions.

Also in this larger model, by relaxing the rational expectations assumption, we show the transition may initially be inflationary.

We extend the analysis in a medium-scale DSGE model and we find again that the green transition is deflationary. However, if households do not anticipate a future fall in income (because they are not rational or the government is not credible), the overall effect of the transition may be inflationary in the first period. We find that the increase in the tax today exerts inflationary pressures, but the expected further increase in the tax tomorrow depresses current demand, putting downward pressure on prices: we show that the second effect is larger. Abstract We analyse a gradual increase in the tax on emissions in a simple two-period New Keynesian model with an AS-AD representation.