Abstracts Economics

Tale of two shocks : Response of the Finnish economy to the European Union carbon policy shocks between 2005 and 2021: Kahden sokin tarina : Suomen talouden reaktiot Euroopan unionin päästökauppajärjestelmän politiikkasokkeihin vuosien 2005 ja 2021 välillä

by Theo Blauberg

In this thesis, my aim is to provide some clarity on how the Finnish economy responded to the European carbon policy shocks. These shocks are identified by using interday price variation of the European Union emission trading certificate futures markets around regulatory changes in the carbon policy regime. Using this instrumental variable, the structural shocks of interest i.e., carbon policy shock, can be identified. In addition to the empirical finding on the Finnish economy, this thesis extends the previously identified time series on the regulatory surprises. Based on the empirical results of this thesis propose, it can be argued that the structural shocks emitting from the European Union carbon policy regime have a dual effect on the Finnish economy. A short-term stimulating effect and a long-term slowing effect. Only the long-term effects are statistically significant, the results are still interestingly different from the results from a European Union-wide study. The possible reasons behind these effects are also discussed.