Climate change is one of the most significant structural force shaping the global economy. Its impact will be substantial and diverse, affecting all economic agents and sectors across the globe. This report compiled by the NGFS group of experts on monetary policy and climate change investigates the possible effects of climate change on the conduct of monetary policy. Based on a comprehensive review of existing literature, studies and expert analyses, it provides some early answers to the following questions:
(I) How does climate change affect key macroeconomic variables?
(II) What are the effects on the monetary transmission channels and central banks’ assessment of their policy space?
(III) Do central banks’ prevalent analytical toolkits adequately reflect climate change?
(IV) How might climate-related risks affect different monetary policy regimes?