This paper focuses on the trade–offs that central banks would face if they were to start tackling climate change. Disruptive natural events can hamper growth and capital accumulation, thereby affecting price and financial stability – elements for which central banks are responsible. Yet, the...

Timely and effective climate action is a precondition for the stability of the global financial system and for long-term, inclusive prosperity. Because the Federal Reserve and other central banks share responsibility with legislative and regulatory authorities and other experts for maintaining...

We study the effects of a temporary Green QE, defined as a policy that temporarily tilts the central bank's balance sheet toward green bonds, i.e. bonds issued by firms in non-polluting sectors. To this purpose, we merge a standard DSGE framework with an environmental model. In our model,...

We use a DSGE model to study the effectiveness of green-asset purchases by the central bank (Green QE), along the transition to a carbon-free economy driven by an emission tax, abstracting from price stability considerations. We find that Green QE helps to further reduce emissions, especially in...

While climate change was largely tackled by government policies in the past, central banks are increasingly grappling with the risks climate change poses. They are evaluating their operational policies to reflect these risks and the transition to a net-zero economy. This paper explores the...

This paper investigates the impact of central banks when supporting policies aiming at greening the financial system. The July 2021 Monetary Policy Strategy Review of the European Central Bank unexpectedly dedicated a whole workstream to climate change. The announcement had a significant effect...

Climate change is humanity’s defining challenge for the XXIst century. Its potentially devastating effects are as well-known as government efforts are insufficient. In the collective endeavor to realign incentives in the fight against climate change, central banks have for a long time been...

Central banks can potentially influence the investment decisions of private financial institutions, which in turn will create incentives towards green technology adoption and development of lower emission business models. This paper examines how monetary policies can be deployed to promote a...

In its strategy review, the European Central Bank's Governing Council unanimously decided to make climate change one of its priorities for the coming years. In this article, we try to understand how this change was achieved, and to what extent it represents a break from central banking as usual....