We develop a Dynamic Stochastic General Equilibrium (DSGE) model with four sectors, including households, production, government, and export. The model is used to assess the response of China’s export trade to environmental tax shocks. The model parameters are obtained through a combination of calibration and Bayesian estimation. Using the impulse response analysis and variance decomposition, we find that environmental tax shocks can drive the reduction of export volume in China. However, the effect of the environmental tax shocks is smaller than export price mark-up rate shocks. These findings yield important implications for reasonably designing and choosing environmental tax rate and export trade policies.
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