The effects of energy price, technology, and disaster shocks on China's Energy-Environment-Economy system

This paper constructs a dynamic stochastic general equilibrium (DSGE) model to analyze the effects of energy price, technology, and disaster shocks on China's Energy-Environment-Economy (3E) system. It also studies stylized facts, as well as co-integration and error correction dynamic analyses, of this system. The disaster shock is modeled as a two-state Markov switching process. The results show that both technology and energy price shocks increase the ratio of environmental investment to GDP. The improvement in technology and rising energy prices helps to reduce CO2 pollution, and improve economic restructuring. Among the three kinds of shocks, technology shock is the most important. The robustness of the model is tested through statistical methods.