Can and should central banks smooth climate change-induced shocks to price and financial stability?

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There is an increasing academic consensus around the magnitude of the threats posed by climate change. The extent to which such threats could be mitigated by central banks, however, has been subject of disagreement. Nonetheless, it is clear that several central banks see climate change as a threat to their core mandates, namely price and financial stability. In turn, these have disproportionate effects on the livelihoods of people living below the poverty line, especially in developing countries. This paper will present the channels through which climate change impacts the mandates of central banks, and will later examine the case of India while additionally suggesting several policy recommendations.

By: Giulia Guerrini

Published on September 11, 2022

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