Monetary policy under climate change
George Economides () and
Anastasios Xepapadeas ()
No 247, Working Papers from Bank of Greece
We study monetary policy under climate change in order to answer the question of whether monetary policy should take into account the expected impacts of climate change. The setup is a new Keynesian dynamic stochastic general equilibrium model of a closed economy in which a climate module that interacts with the economy has been incorporated, and the monetary authorities follow a Taylor rule for the nominal interest rate. The model is solved numerically using common parameter values and fiscal data from the euro area. Our results, which are robust to a large number of sensitivity checks, suggest non-trivial implications for the conduct of monetary policy.
Keywords: Climate change; monetary policy; new Keynesian model; Taylor rule (search for similar items in EconPapers)
JEL-codes: E5 E1 Q5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-env, nep-mac and nep-mon
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