Is the Green Transition Inflationary?

Marco Del Negro, Julian di Giovanni and Keshav Dogra

No 17906, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a two-sector New Keynesian model to analyze the inflationary effects of climate policies. Climate policies do not force a central bank to tolerate higher inflation, but may generate a tradeoff between the central bank’s objectives for inflation and real activity. The presence and size of this tradeoff depends on how flexible prices are in the "dirty" and "green" sectors relative to the rest of the economy, and on whether climate policies consist of taxes or subsidies.

Keywords: Inflation (search for similar items in EconPapers)
JEL-codes: E12 E31 E52 Q54 (search for similar items in EconPapers)
Date: 2023-02
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Working Paper: Is the Green Transition Inflationary? (2023)
Working Paper: Is the Green Transition Inflationary? (2023)
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