Do monetary policy mandates and financial stability governance structures matter for the adoption of climate-related financial policies?

D’Orazio, Paola and Lilit Popoyan

International Economics, 2023, vol. 173, issue C, 284-295

Abstract: The proposed analysis investigates whether the type of central banks’ monetary policy mandates and their financial stability governance arrangements influence the adoption of climate-related financial policies. The empirical findings confirm a statistically significant relationship between a broader monetary policy mandate and the adoption of climate-related financial policies. However, the hypothesis – informed by existing literature – that a more integrated financial stability governance model would imply a higher adoption of climate-related financial policies is not confirmed. Focusing on G20 countries in 2000–2018, the study reveals that a more complex financial stability governance based on less integrated arrangements is more successful for climate-related financial policy adoption. Other factors, such as the presence of a democratic regime, the independence of the central bank, and being a member of the Sustainable Banking Network, have a positive and (statistically) significant effect across all specifications. Moreover, the materialization of climate-related physical risks such as, e.g., floods, heatwaves, droughts, and storms, and transition risks proxied by – among others – CO2 emissions per capita, climate mitigation policies, and financial readiness to implement climate adaptation plans are also essential. The results are robust after considering a different dependent variable and several alternative model specifications.

Keywords: Climate-related financial policies; Green central banking; Central bank mandates; Central bank governance; Climate risks (search for similar items in EconPapers)
JEL-codes: E58 G21 Q54 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:173:y:2023:i:c:p:284-295

DOI: 10.1016/j.inteco.2023.01.004

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