Will the green transition be inflationary? Expectations matter

Ferrari, Alessandro; Landi, Valerio Nispi

doi:10.2139/ssrn.4109488

Cited by 9 publications

(11 citation statements)

References 9 publications

(11 reference statements)

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“…Notice that, given ∆t = 1, equation (12) also replicates its social planner counterpart, equation(14).ECB Working Paper Series No 2845…”

mentioning

confidence: 83%

“…It differs from its green energy counterpart in the presence of the second term in the right hand side, which is Golosov et al's (2014) well-known formula for the marginal externality damage of carbon emissions. 14 The latter term captures the expected present-discounted value of the future economic damages produced by an additional unit of fossil energy consumption. Fossil energy consumption produces carbon emissions today in the amount ξ.…”

Section: Social Planner Equilibriummentioning

confidence: 99%

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Climate-conscious monetary policy

Nakov,

Thomas

2023

SSRN Journal

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“…Notice that, given ∆t = 1, equation (12) also replicates its social planner counterpart, equation(14).ECB Working Paper Series No 2845…”

mentioning

confidence: 83%

Section: Social Planner Equilibriummentioning

confidence: 99%

Climate-conscious monetary policy

Nakov,

Thomas

2023

SSRN Journal

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“…The effect of such policies on prices, however, is a matter of controversy in the literature. On the one hand, as several scholars have found, although these policies do affect energy prices, they have only moderate or even negative effects on inflation (Ferrari & Nispi Landi, 2022;Konradt & Weder Di Mauro, 2023;Moessner, 2022a). Ciccarelli and Marotta (2024) argue that while carbon taxes have an impact on energy prices, this does not lead to higher increases in core prices.…”

Section: The Environmental and Climate Crisis And Price Stabilitymentioning

confidence: 99%

Greener and cheaper: green monetary policy in the era of inflation and high interest rates

Aguila,

Wullweber

2024

Eurasian Econ Rev

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In recent years central bankers have devoted increased attention to the question of whether and how to intervene to address the growing environmental and climate crisis. The climate intervention debate gained momentum during a period of low inflation and loose monetary policy in core economies – a time characterised by near zero interest rates and large asset purchase programmes. Since 2021, however, the macroeconomic context has changed. Against this background, the paper analyses the contradictory and problematic nature of the direction monetary policy has taken in reaction to higher inflation. It argues that higher interest rates delay the green transformation by raising the cost of sustainable investments, and that the resulting delay also hampers prospects for achieving price stability. The paper concludes that the present macroeconomic environment demands a ‘greener and cheaper’ monetary policy approach designed to address the environmental and climate crisis and also to simultaneously fight inflation.

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“…Ferrari and Landi (2022) focus on a standard New Keynesian model and suggest that the green transition is deflationary in the short term because the expected fall in future income depresses current aggregate demand after the announcement of the environmental plan. However, if the economic agents do not have perfect foresight, prices could initially increase, until households become fully aware of the environmental policy plan.…”

Section: Previous Empirical Studiesmentioning

confidence: 99%

The impact of rising EU Allowance prices on core inflation in the Eurozone

Nishigaki

2023

Economic Affairs

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This article examines the impact of EU Allowance (EUA) prices on core inflation in the Eurozone between 2005 and 2022. The empirical results suggest that a positive shock to the EUA price led to higher long-run inflation expectations and core inflation. This implies that the rise in EUA prices can be passed on to consumers and enterprises, leading to an increase in production costs and consumer prices. And, while a positive shock to EUA prices may promote investment in renewable energy in the short term, the impact is not statistically significant and does not last long. The results suggest considerable potential for European policymakers to re-examine policy mechanisms to accelerate renewable energy investment and maintain price stability in the medium term.

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Will the green transition be inflationary? Expectations matter

Cited by 9 publications

References 9 publications

Climate-conscious monetary policy

Climate-conscious monetary policy

Greener and cheaper: green monetary policy in the era of inflation and high interest rates

The impact of rising EU Allowance prices on core inflation in the Eurozone

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