Monetary Policy Under Climate Change
43 Pages Posted: 12 Jul 2018
There are 2 versions of this paper
Monetary Policy Under Climate Change
Monetary Policy Under Climate Change
Date Written: May 8, 2018
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
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