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Ecological Transition

Coping with Collapse: A Stock-Flow Consistent Monetary Macrodynamics of Glo...



Coping with Collapse: A Stock-Flow Consistent Monetary

Macrodynamics of Global Warming 


Updated version: January 5, 2017

Gaël Giraud Florent Mc Isaacz Emmanuel Bovarix Ekaterina Zatsepina



This paper presents a macroeconomic model of endogenous growth that takes intoconsideration the economic impact of climate change, the pivotal role of private debtand income distribution. Using a Goodwin-Keen approach ([25]), based on the Lotka- Volterra logic, we couple its nonlinear monetary dynamics of underemployment and income distribution with abatement costs. Various damage functions `a la  Nordhaus ([33]), Dietz-Stern ([10]), and Burke et al . ([5]) reflect the loss in final production, stock of capital, and labor productivity due to the rise in temperature. An empirical calibration of our model at the world-scale enables us to simulate plausible trajectories for a planetary business-as-usual scenario. Our main finding is that, even though the short-run impact of climate change on economic fundamentals may seem prima facie rather minor, its long-run dynamic consequences may lead to an extreme downside. 

Under plausible circumstances, global warming forces the private sector to leverage in order to compensate for output and capital losses; the private debt overhang may eventually induce a global financial collapse, even before climate change could cause serious damage to the production sector. Under more severe conditions,the interplay between global warming and debt may lead to a secular stagnation followed by a collapse towards the end of this century. However, it turns out that increasing the wage share, fostering employment, or reducing the private-debt-to-output ratio makes it easier to avoid a collapse. The paper concludes by examining the conditions under which the +1.5  C and +2  C targets, adopted by the Paris Agreement (2015), could be reached thanks to an adequate carbon price trajectory.



1 Introduction


Given the increasing awareness about climate change, which crystallized at a diplomatic level in the Paris Agreement of December 2015, and the growing concern about potential downside consequences of a temperature increase, the question is raised of whether global warming might per se induce a severe breakdown of the world economy. This paper tackles this issue and looks for policies designed to mitigate climate change through abatement costs. In particular, at Paris, nearly 200 countries promised to try to bring global emissions down from peak levels as soon as possible.

More significantly, they pledged “to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.” That means getting to net zero emissions between 2050 and the end of this century. The UN’s climate science panel said net zero emissions must happen by 2070 to avoid dangerous warming —a claim reiterated at the COP22 summit of Marrakech (2016). Our results have implications on this.....


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Who is Gaël Giraud...Curriculum Vitæ...

Who is Gaël Giraud...Curriculum Vitæ... - www.mariaportugal.net

Curriculum Vitæ

Gaël Giraud
Born in Paris, 1970. gael.giraud[@]parisschoolofeconomics gael.giraud[@]univ-paris1.fr

(+33) 01 44 14 66 97



- 2004, September. Habilitation to conduct a PhD (Habilitation a` diriger des recherches) in Economics, University Louis Pasteur, Strasbourg. Summa cum laude.

- 1998, January. Doctor thesis in Applied Mathematics, Laboratoire d’Econom ́etrie de l’Ecole Polytechnique/University Paris-1: “Strategic Market Games”. Summa cum laude.

- 1992, September. Master degree (DEA) Mod ́elisation et M ́ethodes Math ́ematiques en Economie, Ecole Polytechnique/University Paris-1.

- 1989- 1993. Ecole Normale Sup ́erieure (ENS Ulm).

- 1989-1992. Ecole Nationale de la Statistique et de l’Administration Economique (ENSAE).


Academic Positions ————————————————————————–

2009.— Senior researcher (Directeur de recherches) at CNRS (Centre National de la Recherche Scientifique/National Center for Scientific Research). Member of the Centre d’E ́conomie de la Sorbonne, UMR 8174.

Associate researcher at Paris School of Economics, 2009-.

Member of the Scientific Committee of the LabEx (Laboratoire d’Excellence) REFI (Financial Regulation), 2011-.

Member of the Steering Committee on the Energetic Transition within the French government and of the Research team “Riskergy” (M. Lepetit) on Energetic Risk and sovereign debt, 2012-.

October 1999-January 2003.- Bureau d’ ́economie Th ́eorique et Appliqu ́ee (BETA), UMR 7522, Poˆle Europ ́een de Gestion et d’ ́economie, University Louis Pasteur (Strasbourg

September 1998-August 1999.- Fellow at CORE (Center of Operations Research, Universit ́e Catholique de Louvain-la-Neuve, Belgium) and Teaching Assistant at the University Paris-2 in Economics.

September 1993-August 1995 and September 1997-August 1998.- Teaching Assis- tant at the University Paris-1 in Mathematics and Economics.

September 1995-August 1997.- Civil service in Chad: teacher in mathematics and physics in the college Charles-Lwanga (Sarh, Chad). Co-founder of a Center for Street Children (Centre Balimba).1

1 1http://membres.lycos.fr/aaermc/asso.html.


Awards————————————————————————————— Prize “Read Economics” 2013 for the book Illusion financi`ere.
Nominated as the “best young French economist” (Le Monde/ Le cercle des

́economistes), 2009.
2d prize of the Euterpe competition in piano, 1988.

Professional Appointments————————————————————

October 1999-July- 2004. Scientific consultant in the R & D department of Fixed Income Analysis and Client Advisory Research at CPR2 and Calyon (Jean- Michel Lasry’s team). Research on inflation indexed Bonds, Credit derivatives, Weather derivatives, Portfolio optimization (in particular, the impact of IFRS/IAS 39 norms), auctions for IPOs, Fixing methods for international financial markets.


Refereed Journal articles ————————————————————

[1] “An Algebraic Index Theorem for Non-smooth Economies”, Journal of Mathe- matical Economics, vol. 36, Issue 4, p. 255269 (December 2001).
[2] “Consistent Collusion-proofness and Correlation in Exchange Economies” (with C. Rochon), Journal of Mathematical Economics, vol. 38, 441-463 (2002).

[3] “Generic Efficiency and Collusion-proofness” (with C. Rochon), Social Choice and Welfare, Volume 20 (3) p. 405 - 428 (Juin 2003).
[4] “Strategic Market Games with Incomplete Markets and Finite Horizon” (with S. Weyers), Economic Theory, vol. 23 (3), p. 467-493 (March 2003)

[5] “Efficiency and Imperfect Competition in Economies with Incomplete Markets”, (with H. Stahn), Journal of Mathematical Economics,vol. 39, Issues 5-6, p. 559-583 (July 2003).
[6] “Homothetic or Cobb-Douglas Behavior Through Aggregation” (with J. K.-H. Quah) Berkeley Electronic Journal, vol. 3: No. 1 (2003). http://www.bepress.com/bejte/contributions/vol3/iss1/art8

[7] “Strategic Market Games: an Introduction”, Journal of Mathematical Eco- nomics, vol. 39, Issues 5-6, p. 355-375 (July 2003).
[8] “On Shapley-Shubik Equilibria with Financial Markets” (with H. Stahn), Eco- nomic Theory, (available on-line : DOI : 10-2007/500199-007-0245-4.)

[9] “Nash Implementation with an Infinite-dimensional Trade Space” (with. G. Bernis) Review of Economic Design, 9.3/2005, p. 271-287.
[10] Giraud, G., and Tsomocos, P. D. (2010) “Nominal uniqueness and money non- neutrality in the limit-price exchange process”, Economic Theory, 45, 303-348.

[11] Giraud, G. & C. Renouard (2010) “C ́omo reformar el capitalismo ? Revista de Fomento social, 259 (2010) 421-440.
[12] Giraud & C. Renouard (2011)“Is the Veil of Ignorance transparent ?” Oecono- mia - History/MEthodology/Philosophy 1, 2 (2011) 239-258.


Articles in French Journals ————————————————————— 2Compagnie Parisienne de R ́eescompte.

[1] “Equilibres corr ́el ́es et incompl ́etude strat ́egique dans les jeux de march ́es comp ́etitifs” Revue Economique, Vol.50(3), p. 583-592 (May 1999).
[2] “Notes sur les jeux strat ́egiques de march ́es” Cahiers d’Economie politique, vol.
37, p. 257-272 (Fall 2000).

[3] “Valeur de Shapley et inefficience des march ́es concurrentiels” Economie et soci ́et ́es 35, 8-9/2004, p. 1599-1623.
[4] “L’optimisation, contrainte unique?” Actes de savoir, 3 (2007).
[5] “Mesurer la contribution des entreprises au d ́eveloppement local : le cas des p ́etroliers au Nigeria”, (2010) (with C. Renouard) Revue Fran ̧caise de Gestion 36, 208-209,101-115.

[6] “Krachs financiers ou trappe a` liquidit ́e - le dilemme des politiques mon ́etaires non-conventionnelles” (with A. Pottier), forthcoming in Revue Economique.




Books ——————————————————————————————–

1) La Th ́eorie des Jeux (Game Theory), Garnier-Flammarion, 357 pages, collec- tion Champs-U, 1rst edition: September 2000. 2d edition: September 2004. 3rd edition (revised and augmented): October 2009.

2) Vingt Propositions pour r ́eformer le capitalisme, (co-directed with C. Re- nouard) Flammarion, 387 pages, 1st ed. March 2009, 2d ed. May 2009, 3rd ed. (revised and augmented): February 2012. Translation into Spanish in progress (ed. Xaveriana universidad, Bogota).

3) Le Facteur 12., with. C. Renouard, 260 pages, Carnets nord, 246 p., March 2012.

4) Illusion financi`ere, Coll. Pourquoi les chr ́etiens ne peuvent pas se taire, Les Editions de l’Atelier, 176 p., October 2012. 2nd ed. January 2013.

Articles in non-refereed Journals—————————————————–

[1] “La charit ́e, fondement du march ́e ?” Soci ́etal, 57, 3`eme trim. 2007.
[2] “Flexicurit ́e europ ́eenne, pi`ege ou promesse ?”, Projet 1/2008 (n◦ 302), p. 29-35. [3] “Le d ́eficit commercial fran ̧c ais en d ́ebat”, Projet 2/2008 (n ◦ 303), p.77-83.
[4] “Au-del`a d’un troisi`eme choc p ́etrolier”, Projet 3/2008 (n◦ 304), p. 76-82.
[5] “L’ ́economie “d’acteurs capables”, Projet 5/2008 (n◦ 306), p. 4-11.
[6] “Quelle ́economie europ ́eenne pour demain ?”, Projet 5/2008 (n◦ 306), p. 78-83. [7] “Crise financi`ere, une chance?”, Projet 6/2008 (n◦ 307), p. 70-77.
[8] “Nouveaux chemins de solidarit ́e”, Etudes, January 2009 - tome 410/1, p. 43-54. [9] Giraud, G. & F. Baule, “Finance de march ́es et bien commun” Revue de sciences humaines/Ethique/Soci ́et ́e, 1 (2009) 61-81.
[10] “R ́egulation mondiale, un rˆole pour le FMI”, Projet 1/2009 (n◦ 308), p. 74-80. [11] “Pour un second Bretton Woods”, Projet 2/2009 (n◦ 309), p. 67-75.
[12] “Les atouts de la France dans la r ́ecession”, Projet 3/2009 (n◦ 310), p. 70-77. [13] “L’emprunt national et l’avenir de la France”, Projet 52009 (n◦ 312), p. 80-87. [14] “Un emprunt pour l’ ́education”, Projet 6/2009 (n◦ 313), p. 27-33.
[15] “Le ̧cons d’une crise et chantiers ouverts”, Esprit, p. 177-182, nov. 2009.
[16] “Le rapport Sen-Stiglitz et le progr`es social”, Projet 1/2010 (n◦ 314), p. 74-80.

 [17] “La dette grecque interroge la zone euro” Projet 2/2010 (n◦ 315), p. 72-79. [18] “Quelle politique industrielle en Europe?”, Projet 3/2010 (n◦ 316), p. 76-82. [19] “R ́eguler les march ́es de mati`eres premi`eres” (with P. Sarton du Jonchay), Pro- jet, 5/2010 (n◦ 318), p. 12-19.
[20] “Banques europ ́eennes : un espoir venant d’Asie”, Etudes, September 2010 - tome 413/3, p. 148-150.
[21] “Les Piigs, la dette et l’anorexie budg ́etaire”, Projet 6/2010 (n◦ 319), p.23-30. [22] “L’Europe entre faillite et reconstruction : ann ́ee z ́ero”, Etudes, February 2011 - tome 414/2, p. 241-243.
[23] “L’ ́epouvantail du protectionnisme”, Projet 1/2011 (n◦ 320), p. 80-89.
[24] “Plaidoyer pour un protectionnisme europ ́een”, Projet 2/2011 (n◦ 321), p.79-87. [25] “Vers le krach des dettes publiques”, Projet 4/2011 (n◦ 323), p. 79-86.
[26] “Apr`es le krach des dettes publiques, reconstruire”, Etudes, October 2011 - vol. 415/4, p. 317-328.
[27] “Dette : que nous r ́eserve 2012 ?”, Projet, n◦ 326 2/2012.
[28] “Faut-il augmenter l’impoˆt sur les revenus ?”, Projet n◦ 327 4/2012, (with C. Renouard).
[29] “La zone euro pi ́eg ́ee par les march ́es financiers”, Projet n◦ 328 6/2012, p. 61-67. [30] “La crise de l’euro n’est pas finie”, Esprit, 5/2012 (mai), p. 7-9.
[31]“Crise de l’euro : qui va payer ?”, Projet, n◦ 330, p. 79-87 octobre 2012
[32] “BPI, la banque qui nen est pas une”, Projet n◦ 331, p. 84-87 dec. 2012


Chapters in books ————————————————————

[1]“Economie math ́ematique”, in Dictionnaire des sciences ́economiques, Jessua Claude, Labrousse Christian, Vitry Daniel (Ed.) (2001) 558-567.
[2] “Economie” in Dictionnaire de la violence, Michela Marzano (Ed.) (2011) 402-41. [3] “La Finance est-elle ́ethique ?”, in Conf ́erences de Carˆeme `a Notre-Dame de Paris, Ed. Parole et Silence, 2012.


Congress proceedings————————————————————

[1] “From Non-tˆatonnement to Monetary Dynamics within General Equilibrium Theory: the Limit-Price Exchange Process”, Congress ⟨⟨ General equilibrium from Walras onwards⟩⟩ , Universit ́e Paris-1, 7 octobre 2009.
[2] “Economie de march ́e et myst`ere du lien social”, Congress ⟨⟨ Face `a une ́economie “sans foi ni loi” : les religions et le droit⟩⟩ , universit ́e Toulouse I, 14-16 juin 2011. [3]“Is there a Keynesian General Equilibrium Theory ?”, Congress ⟨⟨ 75 ans de Th ́eorie g ́en ́erale, Universit ́e Paris-1, 2-3 d ́ecembre 2011.


Working Papers————————————————————

[1] Diongue, A., G. Giraud & C. Renouard (2012) “Measuring the contribution of extractive industries to local development : the case of oil companies in Nigeria”, CES WP 2011/43.
[2] Giraud, G. & Orntangar (2011) “Monetary Policy under Finite Speed of Trades and Myopia”, CES WP 2011-11.

[3] Giraud, G. & C. Renouard (2011) “”In search of an alternative to shareholder value maximization”, CES WP 2011-38.
[4] Giraud, G. & S. Brangewitz (2012) “Learning in Infinite Horizon Strategic Market Games with Collateral and Incomplete Information”, CES 12062 WP.

[5] Giraud, G. & A. Pottier (2012) “Debt-Deflation versus the Liquidity Trap: the Dilemma of Non-conventional Monetary Policies”, CES WP 12064.
[6] Giraud, G. & M. Woooders (2012) “On the Co-emergence of the State and of Money”, CES WP 12094.

[7] Galand, G., G. Giraud & A. Grandjean (2012) “The Financing of the German recovery (1933-1936)” WP 12092.
[8] Giraud, G. (2012) “On the Inefficiency of complete markets: the Shapley Value approach”, WP 12093.

[9] Giraud, G. (2012) “Coherent Multidimensional Poverty Indices”, 12095.
[10] Giraud, G., R. de La Martini`ere, C Renouard & C. Sutter (2012) “Relational Capability: A Multidimensional approach” 12096


Other writings———————————————————————

1) Traduction of “Kleine theologische Bermerkungen zum Status naturae laps” by Karl Rahner sj, publications M ́edias`evres, 2002.
2) “Les Enfants de Balimba”, J ́esuites en mission, december 2000.
3) “Pour une th ́eologie ⟨⟨ apocalyptique⟩⟩ de histoire Une lecture de l’Adversus Haere- ses, V, III” (2011) Recherches de Science Religieuse, 2011/3 (Tome 99).

4) Chemins vers la soif, theater piece, played by the AVPA company (production: Val ́erie Castel- Jordy) in Paris, Lyon, Tours, 2010-2011.


Press articles (selection)————————————————————

Les ́echos

“ Economie math ́ematique” , Febr. 9. 2004. “R ́eglementer les march ́es de gr ́e-a`-gr ́e” , Nov. 12 2008.

Le Monde

“Une solution a` la crise n ́egociable avec l’Allemagne ?” (with A. Grandjean et al.) 12/12/2011.
“Un projet de r ́eforme bancaire insatisfaisant”, 13/02/2013.

La Croix

“ Repenser le rˆole des banques centrales” , 02/21/2008
“ De l’ ́ethique des march ́es au p ́ech ́e social” , 04/03/2008
“ Les chantiers de la “taxe Chirac”” , 05/20/2008
“ In ́egaux devant la mort” , 07/03/2008
“ Construire une soci ́et ́e de la confiance” , 09/08/2008
“ Cartes de cr ́edit, le prochain krach” , 09/25/2008
“ La France, un paradis fiscal ?” (with C. Renouard), 11/12/2008. “G20, un essai a` transformer” , 04/14/2009.

  •  “  Les origines de la crise financi`ere” , 07/06/2009.
  • “  Le capitalisme peut-il ˆetre juste”(with C. Renouard), 08/12/2009.
  • “  La crise n’est pas finie” , 08/25/2009.
  • “  Comment r ́eformer les banques” , 12/01/2009.
  • “  Le plein, combien de temps encore” , 12/15/2009.
  • “  Vers une ́economie de ⟨⟨ biens partag ́es⟩⟩ ?” (with C. Renouard) 01/26/2010. “Le Cas Goldman Sachs” , 05/18/2010.
    “Le micro-cr ́edit a` but lucrafit : un leurre”, La Croix, 03/01/2011.


“ El fu ́turo esta en Am ́erica del Sur” , El Commercio, Peru, 16/10/2009.
“ Quelle politique industrielle europ ́eenne ?”, Le Figaro, 13/07/2010.
“Appel a` une sortie de crise par l’ ́ecologie” (with N. Hulot et al.), Huffinton Post, 05/27/2012


Editorial activities————————————————————

Guest editor of Journ. of Math. Econ. (special issue 2003, “strategic market games”). Referee for Econometrica, Journal of Economic Theory, Journ. of Public Econ., Journ. of Math. Econ., Economic Theory, Games and Economic Behavior, Theory and Decision, Recherches ́economiques de Louvain.


Ph D Students————————————————————

Benjamin Ngu ́enamadji Orntangar : “Dynamique de non-tˆatonnement calculable en temps discret” . (Paris-1, defended May 2011).
Sonja Brangewitz : “Strategic and CooperativeMarket Games”, (Paris-1/Bielefeld, defended Feb. 2012) (co-advisory with W. Trockel, Bielefeld.)

Herv ́e Lado : “Responsabilit ́e soci ́etale des multinationales extractives dans le Delta du Niger” (Paris-1, started in 2010).
Pham Ngo ́c San : “Money in Infinite Horizon with Collateralized Assets” (started Sept. 2011)

Veronica Acurio : “The Peak Oil in a DSGE model” (started Sept. 2011)
Nguyen Do Hahnh : “Banks and Financial Instability with Non-Neutral Money” (started Sept. 2011)
Henry Gonzales : “Micro-credit and the Leverage Cycle in India” (started Sept. 2011)
Florent McIsaac : “Energy and debts in a DSGE model” (started Sept. 2012) Didier Faivre : “The Leverage cycle” (started Sept. 2012)
Rakesh Gupta : “Assessing the Impact of a public policy for compromised RCT: the Indian case” (started Sept. 2012).



- 2012 : Money, Banking and Finance, ESCP-Europe.
- 2009- 12: Liquidity and Fair Value, Paris-1, Paris School of Economics, Master 2 ETE.
- 2009. Strategy, Auctions and IPO, ESCP-EAP (Paris).

- Summer 2004. Mathematical finance in continuous time. National University of Ha-No ̈ı(Viet-Nam).
Summer 2003. Introduction to Game Theory, National University of Ha-No ̈ (Viet- Nam).

- 2002-2004. Mathematical Finance (Master 2) University Paris-1 (Paris).
- 2002-2003. Evolutionary Game Theory (Ph.D lectures) University Louis Pasteur (Strasbourg).
- 2001-2002. Game Theory (Ph.D lectures) University Louis Pasteur (Strasbourg). - 1999-2000. General Equilibrium Theory (Graduate courses), University Louis Pas- teur (Strasbourg).
- 1998-1999. Advanced Microeconomics, Master 2 CORE (University of Louvain-la- Neuve, Belgium).
- 1992-1998. Microeconomy, Macroeconomy, Mathematics (analysis, algebra, proba- bility), History of Economic Thought, Undergraduate Paris-1 and 2, Ecole Normale Sup ́erieure de Fontenay St-Cloud, ENSAE.



- DeAPM : Descending electronic Auction for Primary Markets, (2004) (patent 60/568,549 methods and apparatus for primary markets).

- A fixing Method for electronic Clearing Houses, in process.

Other activities ——————————————————————————–

1) 2011-. Member of the entrance competition committee at the Ecole Normale Sup ́erieure (Ulm) in economics.

2) Research conventions with

- Total, Impact evaluation of the Oil companies in the Niger Delta, 2009-. (with C. Renouard, Essec)

- Danone, Impact evaluation of a Danone development project with pemulungs in Tangerang (Indonesia), 2011-. (with C. Renouard, Essec).

- Veolia, Impact evaluation of the water access in the slums of Nagpur (India), 2011-. (with C. Renouard, Essec).

- Veolia, Unconventional financing for infrastructure projects in France, 2012. (with A. Grandjean, Carbone 4).

- Riskergy, coordination of the scientific work underlying a rating agency for the sovereign energetic risk.

3) Co-founder of the Parlamentarian club Oikonomia (with Gr ́egoire de la Ronci`ere and C. Renouard) 2009-. (Honorary chairmen: L. Giscard d’Estaing and J. Bour- din).

4) Founding member of Finance Watch (2011).



German (excellent), English (fluent), Russian, Spanish (scholar), Sa ́r (Chadian dialect), Schwiizerdutsch (Swiss dialect), Latin, Classical Greek, Biblical Hebrew.

C++, SAS, TEX, GAUSS(X), “R”.