Monetary Policy Under Climate Change

43 Pages Posted: 12 Jul 2018

See all articles by George Economides

George Economides

Athens University of Economics and Business - Department of International and European Economic Studies

Anastasios Xepapadeas

Athens University of Economics and Business; University of Bologna - School of Economics, Management, and Statistics

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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

Suggested Citation

Economides, George and Xepapadeas, Anastasios, Monetary Policy Under Climate Change (May 8, 2018). CESifo Working Paper Series No. 7021, Available at SSRN: https://ssrn.com/abstract=3200266 or http://dx.doi.org/10.2139/ssrn.3200266

George Economides (Contact Author)

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

GR-10434 Athens
Greece
+30-210-8214122 (Phone)
+30-210-8203729 (Fax)

Anastasios Xepapadeas

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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