To Be or Not to Be “Green”: How Can Monetary Policy React to Climate Change?

Boneva, Lena; Ferrucci, Gianluigi; Mongelli, Francesco Paolo

doi:10.2139/ssrn.3971287

Cited by 24 publications

(16 citation statements)

References 28 publications

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“…65 Therefore, BI's initiatives in responding to climate change issues can be divided into: (1) reacting to climate change; (2) raising awareness of climate change risks; and (3) proactively mitigating climate change. 66 The division into these three categories also shows the extent to which BI's responses are within the limits of its mandate. First, reacting to climate change measures includes protecting central banks' balance sheets and preserving their ability to deliver on their price stability mandate in the face of materialising of climate change risks, assess the impact of climate change on the economy, financial markets, and the monetary transmission mechanism, incorporate climate change into their analytical toolkits, and develop monetary policy strategies that are resistant to climate change.…”

Section: Legitimacy Of Bank Indonesia's Involvement and Policies For ...mentioning

confidence: 99%

The Central Bank’s Policy Justification in Mitigating Climate Change

Chamdani

Santoso²

2023

j. cent. bank. law and inst.

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In recent years, increasing awareness of the impact of climate change has attracted the attention of central banks in a number of countries. Under their authority, some central banks have started to formulate “green policies.” These green policies include a green version of quantitative easing, buying green bonds in order to support the growth of environmentally friendly financial institutions, and imposing restrictions or prohibitions on non-environmentally friendly industry lending by banks. Bank Indonesia itself is starting to explore banking policies that are more environmentally friendly, one of which is by managing financial instruments in a sustainable manner and providing green incentives. This raises unavoidable questions about the legitimacy of Bank Indonesia’s promulgation of these environmentally friendly bankingpolicies and the issues of independence, accountability and legitimacy that accompany them. This research found that green finance policies were adopted by Bank Indonesia due to its flexibility and/or independence in deploying various policy instruments, the expansion of Bank Indonesia’s mandate to maintain financial system stability, institutional relationships, and involvement in various green financial forums. However, further discussion shows that this expansion of its mandate simultaneously affects the independence of the central bank leading to issues surrounding the accountability and even legitimacy of the central bank

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Section: Legitimacy Of Bank Indonesia's Involvement and Policies For ...mentioning

confidence: 99%

The Central Bank’s Policy Justification in Mitigating Climate Change

Chamdani

Santoso²

2023

j. cent. bank. law and inst.

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“…21 In the last decade, the bond portfolios of all major central banks have expanded due to prolonged asset purchase programs, which have been deployed to achieve monetary policy objectives when the policy rate hit its lower bound. However, these purchases are carried out by central banks in proportion to the outstanding market shares, thus generating a potential "carbon bias" in central banks' portfolios as high-carbon companies have a larger weight in corporate bond markets, with respect to less carbon-intensive companies (Boneva et al 2021), since the purchases are "backward-looking" and relate to the carbon-intensive past economy.…”

Section: Green Monetary Policies (Gmp)mentioning

confidence: 99%

“…• Mandates: most central banks' mandates do not explicitly consider sustainability as a primary objective. This creates issues for the central banks' legitimacy when deploying their monetary policy tools to support sustainability objectives (Boneva et al 2021).…”

Section: Green Monetary Policies (Gmp)mentioning

confidence: 99%

The Role of Green Financial Sector Initiatives in the Low-Carbon Transition: A Theory of Change

Monasterolo¹,

Mandel²,

Battiston³

et al. 2022

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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“…Boneva et al [15] emphasize that man-made global warming is anticipated to have an impact on central banks' capacity to meet their low and stable inflation responsibility in a range of methods. Changes in climate may hamper banks routine business activities as well as those of their customers [16].…”

Section: Introductionmentioning

confidence: 99%

“…Lately, the money supply mandate of monetary authorities has been added to the mix. Interest has been devoted to the responsibility of financial regulation as a whistleblower to the fundamental shift that will dramatically affect the ecosystem in which central banks run, as well as to the potential input that pecuniary blueprint may make to resolving ecological concerns [15]. This necessitates assessing the potential pathways via which financial system and weather disruption interplay.…”

Section: Introductionmentioning

confidence: 99%

Climate Monetary Policy Design and Modelling

Omodero¹,

Alege²

2023

IJDNE

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The significance of green monetary policy design in the face of current climatic issues has been investigated. The study considers the perspectives of other researchers in previous studies while focusing on the Nigeria situation and monetary climate policies in the country. The study's goal is to put current monetary policy instruments to the test and check their alignment with climate fluctuations and policies. The analysis spans the years 1990 to 2020, utilizing data from the World Development Indicators and the Central Bank of Nigeria's statistics archives. Various analytical studies are performed, and the monetary policy tools used are individually assessed to validate their efficiency in reducing climate change. The study applies ordinary least squares methodologies, indicating that the Central Bank's money supply and monetary policy rate processes match with climate change monetary policy adaptation. As a result, the country's money supply and interest rate are environmentally beneficial. Nonetheless, the analysis concludes that inflation and exchange rates are unimportant throughout the time period under consideration. As a response, the research recommends that the government, through its financial institutions, completely implement monetary policy changes in favor of climate change in the country. The research also proposes that the authorities aggressively seek green financing of ecofriendly technology using green bonds, which are currently on the market. The budgeting system is critical for monitoring the green fund's administration and effective application to green initiatives.

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To Be or Not to Be “Green”: How Can Monetary Policy React to Climate Change?

Cited by 24 publications

References 28 publications

The Central Bank’s Policy Justification in Mitigating Climate Change

The Central Bank’s Policy Justification in Mitigating Climate Change

The Role of Green Financial Sector Initiatives in the Low-Carbon Transition: A Theory of Change

Climate Monetary Policy Design and Modelling

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