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Greening monetary policy

5 monthes ago   |   By Bruegel

Central banks have already started to look at climate-related risks in the context of financial stability. Should they also take the carbon intensity of assets into account in the context of monetary policy? The guiding principle in the implementation of monetary policy has been ‘market neutrality', whereby the central bank buys a proportion of the market portfolio of available corporate and bank bonds. But this implies a carbon bias, because capital-intensive companies tend to be more carbon intensive.
The author first reviews the legal mandate of the Eurosystem. While the primary...
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