Green Financial and Monetary Policy in the Low-Carbon Transition: Drivers and Impacts
Lukas Rischen (Humboldt University) examines how green fiscal and monetary policy instruments shape renewable energy investment and accelerate countries’ progress along their low-carbon transition pathways.
Weathering the storm: sectoral economic and inflationary effects of floods and the role of adaptation
Matteo Ficarra (Geneva Graduate Institute) and Rebecca Mari (Bank of England) use satellite data on floods to estimate the impact of floods on GDP and inflation at the sector level in English counties.
Warning Words in a Warming World
Emanuele Campiglio (University of Bologna, EIEE, LSE), Jerome Deyris (Sciences Po), Davide Romelli (Trinity College Dublin) and Ginevra Scalisi (Sant’Anna Pisa) present a new dataset on central banks’ communication about climate change and ask what drives institutions engagement with environmental issues, how do they frame these new challenges within their existing mandates and how do financial markets respond to this expanding scope of central bank communication.
The politics of green financial policies
Monica DiLeo (Hertie School) discusses the role of different public institutions in the green transition and examines what kinds of green financial policies are both institutionally and politically feasible.
Green Credit Guidance
Historically, central banks and other financial policymakers have played far larger roles in supporting structural economic transformations through the use of credit policies. In this Digest, Katie Kedward (UCL Institute for Innovation and Public Purpose) reflects upon the potential relevance of credit policies to support the green transition.
Green Investments and Rising Interest Rates
Jens van’t Klooster (University of Amsterdam) and Eric Monnet (Paris School of Economics and CEPR) look at how tight monetary policy impacts low-carbon investments. Most importantly, they suggest green credit policy instruments, central banks can use, that will enable them to address inflationary pressures without jeopardizing the long-term decarbonization of the economy.
Greenflation and implications for monetary policy
The recent experience with surging inflation, partly driven by supply shocks to the energy sector, has ampiflied concerns over “greenflation,” inflationary pressures resulting from the transition to sustainable energy sources. For this digest Conny Olovsson (ECB and Sveriges Riksbank) and David Vestin (Sveriges Riksbank) have curated the most recent literature on the theoretical and empirical findings on how greenflation arises and what central banks can do to curb it. They, and the papers they have chosen, highlight the central role for foresighted monetary policy as well as a smooth carbon taxation path.
Climate Risks in Financial Markets
Climate change has a destabilizing effect on financial markets. If market actors become overexposed to climate-sensitive assets, the ensuing market failure provides justification for central bank intervention to prevent cascading financial effects.
The impact of climate change on price stability
To secure price stability and fulfill their primary mandate, policymakers should act promptly: interest rate management, expectation anchoring, financial stabilization, cooperation with fiscal authorities are just some of the tools at their disposal.
Monetary policy and physical risks – some recent insights
Miles Parker (European Central Bank) discusses recent research on potential policy responses to physical climate impacts.