RESPONSE OF MONETARY POLICY ON CLIMATE CHANGES

Abstract

The world has commenced a transition towards sustainable development that respects the need to preserve the environment. Central banks are making efforts to encourage and facilitate the transition to a sustainable finance model that is a prerequisite for a green transition. Central banks have been working intensively on adjusting the existing framework for the implementation of monetary policy in the light of the requirements for the incorporation of climate considerations, so the paper provides an overview and analysis of possible changes in the framework. The conclusion of the paper is that central banks must be careful in weighing the respective measures so as not to jeopardize their primary goal - price stability.