On the Green Interest Rate. / Nicholas Z. Muller.

Format:

Book

Author/Creator:

Muller, Nicholas Z.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28891.

NBER working paper series no. w28891

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

This paper demonstrates how a central bank might operationalize an expanded role inclusive of managing risks from environmental pollution. The analysis introduces the green interest rate (rg) which depends on temporal changes in the pollution intensity of output. This policy instrument reallocates consumption from periods when output is pollution intensive to when output is cleaner. In economies on a cleaning-up path, rg exceeds r*. For those growing more polluted, rg is less than r*. In the U.S. economy from 1957 to 2016, rg exceeded r* by 50 basis points. Federal environmental policy reversed the orientation between rg and r*.

Notes:

Print version record

June 2021.