From Market to Green Economics: Impact on Monetary and Financial Policies

Forthcoming in: Dariusz Adamski, Fabian Amtenbrink, Jakob de Haan (editors), Cambridge Handbook on European Monetary, Economic and Financial Market Integration

26 Pages Posted: 19 Jul 2022 Last revised: 17 Aug 2023

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Hans Stegeman

Erasmus University Rotterdam (EUR)

Date Written: April 7, 2023

Abstract

The ECB has already set the step from ‘a monetary policy rule’ towards a broad central bank with monetary and financial tasks. The next step is to green these monetary and financial stability tasks. This chapter argues that a change from the prevailing ‘market economics’ paradigm to a ‘green economics’ paradigm will make this transformation effective. Sustainability challenges are complex in nature and have a long horizon.

On the financial side, the ECB should ‘de-risk the financial system’ by greening its financial stability and supervision tasks. This chapter provides an overview of the new financial instruments and their application by the ECB. On the monetary side, the ECB is still adopting a two-pronged strategy: a risk approach and an allocational approach. While the risk approach fits within market economics thinking, the green economics paradigm suggests an allocational approach whereby the ECB moves from high-carbon to low carbon assets in its monetary policy operations. The allocational approach is gaining ground.

Keywords: Central banking, sustainability, monetary policy, financial stability, financial supervision

JEL Classification: E50, E58, G01, G28, H23

Suggested Citation

Schoenmaker, Dirk and Stegeman, Hans, From Market to Green Economics: Impact on Monetary and Financial Policies (April 7, 2023). Forthcoming in: Dariusz Adamski, Fabian Amtenbrink, Jakob de Haan (editors), Cambridge Handbook on European Monetary, Economic and Financial Market Integration , Available at SSRN: https://ssrn.com/abstract=4155893

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Hans Stegeman

Erasmus University Rotterdam (EUR)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
203
Abstract Views
675
Rank
279,365
PlumX Metrics