TY - UNPB

T1 - Modelling Monetary and Fiscal Policy to Achieve Climate Goals

AU - Altunbas, Yener

AU - Qu, Xiaoxi

AU - Thornton, John

PY - 2024/3/1

Y1 - 2024/3/1

N2 - We present and estimate a Bernanke et al. (1999)-type dynamic general equilibrium model modified to allow the authorities to use monetary and fiscal policy to shape bank behavior in support of climate goals. In the model, central bank refinancing and reserve requirements are employed to support bank lending for environmentally friendly projects at lower rates of interest than for other projects. At the same time, fiscal policy supports green bank lending through loan guarantees, which also reduces the relative cost of borrowing by green firms. Under reasonable parameters of the model, rediscount lending is shown to be the most effective policy tool for directing bank lending to support climate goals.

AB - We present and estimate a Bernanke et al. (1999)-type dynamic general equilibrium model modified to allow the authorities to use monetary and fiscal policy to shape bank behavior in support of climate goals. In the model, central bank refinancing and reserve requirements are employed to support bank lending for environmentally friendly projects at lower rates of interest than for other projects. At the same time, fiscal policy supports green bank lending through loan guarantees, which also reduces the relative cost of borrowing by green firms. Under reasonable parameters of the model, rediscount lending is shown to be the most effective policy tool for directing bank lending to support climate goals.

M3 - Working paper

VL - DOCUMENTO DE TRABAJO N° 310

BT - Modelling Monetary and Fiscal Policy to Achieve Climate Goals

PB - RED Nacional de Investigadores en Economia

ER -