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Monetary Policy and Green Transition

Author

Listed:
  • Pal Peter Kolozsi

    (Magyar Nemzeti Bank)

  • Balazs Istvan Horvath

    (Magyar Nemzeti Bank)

  • Judit Csutine-Baranyai

    (Magyar Nemzeti Bank)

  • Veronika Tengely

    (Magyar Nemzeti Bank)

Abstract

One of the biggest challenges in the coming decades is the achievement and maintenance of environmental sustainability, regarding which the central banks have also shown an increasingly active and supportive attitude in recent years. A new monetary policy approach is emerging, but it is unclear how central banks can participate in the green transition. In this paper, we briefly present the most relevant issues in this regard, namely how price stability, which is the most important objective of central banks, is affected by climate change and the green economic transformation; what follows from the potential conflict between the goals of green transition and price stability in terms of the green activity of central banks; and what challenges are faced as a result by central banks that also have the sustainability goal in mind.

Suggested Citation

  • Pal Peter Kolozsi & Balazs Istvan Horvath & Judit Csutine-Baranyai & Veronika Tengely, 2022. "Monetary Policy and Green Transition," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 21(4), pages 7-28.
    • Handle: RePEc:mnb:finrev:v:21:y:2022:i:4:p:7-28
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    References listed on IDEAS

    as
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    2. Boros, Anita & Lentner, Csaba & Nagy, Vitéz, 2022. "New Aspects of Sustainability: Analysis of the European Practice of Non-Financial Reports," Public Finance Quarterly, Corvinus University of Budapest, vol. 67(2), pages 181-195.
    3. Boneva, Lena & Ferrucci, Gianluigi & Mongelli, Francesco Paolo, 2021. "To be or not to be “green”: how can monetary policy react to climate change?," Occasional Paper Series 285, European Central Bank.
    4. Martin L. Weitzman, 2011. "Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 275-292, Summer.
    5. Pal Peter Kolozsi & Sandor Ladanyi & Andras Straubinger, 2022. "Measuring the Climate Risk Exposure of Financial Assets - Methodological Challenges and Central Bank Practices," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 21(1), pages 113-140.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    environmental sustainability; green finance; monetary policy;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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