The Impact of Green Monetary Policy in Developed Countries

Abstract

Climate change is currently one of the greatest challenges facing humanity, significantly affecting the effectiveness of economic policies. To address this issue, green monetary policy has been proposed as a measure not only to stabilize prices, and promote economic growth but also to minimize the negative impacts on the environment and support the transition to a low-emission economy. Our paper focuses on studying the impact of green monetary policy in pioneering countries, including the UK, Germany, and China, during global economic turbulence from 2000 to 2020. The paper uses the PVAR model to analyze the impact of green monetary policy through variables such as interest rates, special reserves, inflation, unemployment rates, carbon emissions, and economic growth. From this analysis, the authors provide recommendations to promote the greening of monetary policies in other countries worldwide.