UCL Discovery
UCL home » Library Services » Electronic resources » UCL Discovery

Engaging central banks in climate change? The mix of monetary and climate policy

Chen, C; Pan, D; Huang, Z; Bleischwitz, R; (2021) Engaging central banks in climate change? The mix of monetary and climate policy. Energy Economics , 103 , Article 105531. 10.1016/j.eneco.2021.105531.

[thumbnail of Bleischwitz_Engaging Central Banks in Climate Change.pdf] Text
Bleischwitz_Engaging Central Banks in Climate Change.pdf - Accepted Version
Access restricted to UCL open access staff until 25 February 2023.

Download (1MB)

Abstract

Given the recent debate on the role of central banks under climate change, this research theoretically investigates the mix of monetary and climate policy and provides insights for central banks who are considering their engagement in the climate change issue. The “climate-augmented” monetary policy is pioneeringly proposed and studied. We build an extended Environmental Dynamic Stochastic General Equilibrium (E-DSGE) model as the method. By this model, we find the following results. First, the making process of monetary policy should consider the existing climate policy since it is a factor that can influence price level and inflation. Second, the reaction coefficients in traditional monetary policy rule can be better set to enhance welfare when climate policy is given. This provides a way to optimise the policy mix. Third, if a typical-form climate target is augmented into the monetary policy rule, a dilemma could be created. This means that it has some risks for central banks to care for the climate proactively by using the narrow monetary policy (interest rate).

Type: Article
Title: Engaging central banks in climate change? The mix of monetary and climate policy
DOI: 10.1016/j.eneco.2021.105531
Publisher version: https://doi.org/10.1016/j.eneco.2021.105531
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Central bank, Climate change, Monetary policy, Climate policy, E-DSGE
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
URI: https://discovery.ucl.ac.uk/id/eprint/10135174
Downloads since deposit
0Downloads
Download activity - last month
Download activity - last 12 months
Downloads by country - last 12 months

Archive Staff Only

View Item View Item