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Monetary policy under climate change

Author

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  • George Economides

    (Athens University of Economics and Business, and CESifo)

  • Anastasios Xepapadeas

    (Athens University of Economics and Business, University of Bologna)

Abstract

We study monetary policy under climate change in order to answer the question of whether monetary policy should take into account the expected impacts of climate change. The setup is a new Keynesian dynamic stochastic general equilibrium model of a closed economy in which a climate module that interacts with the economy has been incorporated, and the monetary authorities follow a Taylor rule for the nominal interest rate. The model is solved numerically using common parameter values and fiscal data from the euro area. Our results, which are robust to a large number of sensitivity checks, suggest non-trivial implications for the conduct of monetary policy.

Suggested Citation

  • George Economides & Anastasios Xepapadeas, 2018. "Monetary policy under climate change," Working Papers 247, Bank of Greece.
    • Handle: RePEc:bog:wpaper:247
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate change; monetary policy; new Keynesian model; Taylor rule;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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