Luca Fornaro, Veronica Guerrieri, Lucrezia Reichlin
Accelerating the transition to a green economy is a necessity. This column argues that the green transition will create trade-offs for central banks. Phasing out polluting technologies is likely to temporarily slow down productivity growth, thus creating inflationary pressures. If central banks choose to ‘look through’ and let inflation temporarily rise, inflation expectations may de-anchor. A tight monetary policy approach, instead, will lead to unemployment, lower investments in green technologies, and potentially permanent damages to GDP and the green transition. Fiscal and credit policies that sustain green investments may be the best option to address these trade-offs.
Πηγή: Voxeu