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Monetary Policy under Climate Change

George Economides and Anastasios Xepapadeas ()

No 7021, CESifo Working Paper Series from CESifo Group Munich

Abstract: 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: E50 E10 Q50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-mac
Date: 2018
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