Climate change and monetary policy: issues for policy design and modelling
Warwick McKibbin,
Adele C Morris,
Peter Wilcoxen and
Augustus J Panton
Oxford Review of Economic Policy, 2020, vol. 36, issue 3, 579-603
Abstract:
This paper explores the interaction of monetary policy and climate change as they jointly influence macroeconomic outcomes, connecting policy and outcomes in each realm to the implications of the other. It also explores the nature of the macroeconomic model that would be required to explore the links between monetary policy and climate policy. The paper has four parts. First, it reviews the relevant macroeconomic outcomes of emissions mitigation policy and climatic disruption, exploring how negative supply shocks can affect central banks’ ability to forecast and manage inflation. Second, the paper reviews basic approaches to monetary policy, including inflation and output targeting, and other responsibilities that may fall to central bankers. Third, we bring together the two sets of issues to consider the appropriate monetary framework in a carbon-constrained and climatically disrupted world and to highlight the climate policy frameworks that can make monetary policies more efficient and effective. We then summarize the nature of the macroeconomic modelling framework that is needed to better analyse climate and monetary policy interactions. We conclude that policy responses to climate change can have important implications for monetary policy and vice versa and that, in light of the urgency of ambitious climate action, these policy spheres should be brought together more explicitly and more appropriate macroeconomic modelling frameworks developed.
Keywords: monetary policy; climate change; carbon pricing; G-Cubed; macroeconomic models; multi-sector models (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (26)
Downloads: (external link)
http://hdl.handle.net/10.1093/oxrep/graa040 (application/pdf)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:oup:oxford:v:36:y:2020:i:3:p:579-603.
Access Statistics for this article
Oxford Review of Economic Policy is currently edited by Christopher Adam
More articles in Oxford Review of Economic Policy from Oxford University Press and Oxford Review of Economic Policy Limited
Bibliographic data for series maintained by Oxford University Press (joanna.bergh@oup.com).