Climate Policy and Global Challenges: A Monetary Policy Perspective

Abstract

The physical and transition risks associated with climate change have important implications for the macroeconomic environment and are therefore relevant for consideration by central banks and monetary policy makers. This paper discusses the challenge of attaining net zero, and highlights that the choice of climate transition policies implemented by home and foreign authorities have consequences for volatility, output and inflation. Overall, however, much more research is needed to understand the full effects of climate change on the macroeconomy. This paper was prepared based on the “The World Economy: Where to from here?” session organized by Dominick Salvatore at the American Economics Association meeting on January 7, 2023.