Is the Green Transition Inflationary? - FEDERAL RESERVE BANK of NEW YORK

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Is the Green Transition Inflationary?

Number 1053
February 2023

JEL classification: E12, E31, E52, Q54

Authors: Marco Del Negro, Julian di Giovanni, and Keshav Dogra

We develop a two-sector New Keynesian model to analyze the inflationary effects of climate policies. Climate policies do not force a central bank to tolerate higher inflation, but may generate a tradeoff between the central bank's objectives for inflation and real activity. The presence and size of this tradeoff depends on how flexible prices are in the “dirty” and “green” sectors relative to the rest of the economy, and on whether climate policies consist of taxes or subsidies.

Available only in PDF

AUTHOR DISCLOSURE STATEMENT(S)

Marco Del Negro
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper.

Julian di Giovanni
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper.

Keshav Dogra
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper.

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