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Toward a green economy: the role of central bank’s asset purchases

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  • Ferrari, Alessandro
  • Landi, Valerio Nispi

Abstract

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 the early stage of the transition. We find that a crucial parameter to determine the effectiveness of Green QE is the elasticity of substitution between the brown and the green good: the higher the elasticity the stronger the impact of the policy on emissions. JEL Classification: E52, E58, Q54

Suggested Citation

  • Ferrari, Alessandro & Landi, Valerio Nispi, 2023. "Toward a green economy: the role of central bank’s asset purchases," Working Paper Series 2779, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232779
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    3. Le, Anh H. & Uddin, Gazi Salah & Lucey, Brian, 2024. "Green targeted lending operations in the Euro Area," Economics Letters, Elsevier, vol. 243(C).

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    More about this item

    Keywords

    central bank; climate change; monetary policy; quantitative easing;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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