Abstract
This chapter focuses on monetary policy strategies and interventions supporting a green new deal. All around the world, and particularly in so-called “advanced economies”, the covid-19 pandemic has revealed the flaws of neoliberalism, notably in respect of (a lack of) State intervention and regulation of economic activity. As regards monetary policy, it is plain that central banks should not limit their focus to price stability, but must first and foremost act to guarantee financial stability—which has become a major issue after the outbreak of the global financial crisis in 2008. Now, owing to the urgent needs to act against the huge damages caused by climate change all over the world, monetary policy should also contribute to a collective effort in supporting and carrying out an ecological transition that favours economic development for the common good, thereby satisfying people’s needs. This is the reason why the public sector must promote a green new deal with the monetary and financial support of central banks. The former should issue “green bonds” to finance the ecological transition, which the latter should buy on the primary market, and introduce in the list of eligible assets to be used as collateral by any banks in need of liquidity on the interbank market. Further, central banks should steer their policy rates of interest with a view to support and then to enhance the ecological transition. This amounts to reducing the interest rate for those loans that support such a transition, particularly as regards firms’ “green” investments. Central banks will thereby contribute to make the world a better place to live in, both as regards climate conditions and financial stability. In such a framework, firms’ business will benefit from central banks’ decisions, as far as the former contributes to achieve the policy targets of the latter. Social cohesion will be enhanced thereby, and the world will become a better place to live in, with a sustainable economy over the long run.
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Rossi, S. (2022). Monetary Policy Support for a Green New Deal. In: Karagiannis, N., King, J.E. (eds) Visions and Strategies for a Sustainable Economy. Global Institute for Sustainable Prosperity. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-06493-7_5
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DOI: https://doi.org/10.1007/978-3-031-06493-7_5
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