Is climate change a monetary phenomenon? Evidence from time series analysis

All earthling on the planet is affected by changes in our climate, which have become more apparent in recent years. Efforts to combat climate change can be viewed as a large public good everyone benefits without rivalry or exclusion. Therefore, climate change policy explicates a market failure because the actions that protect against climate change are very costly, but the benefits of such actions are enjoyed by all and sundry. It is therefore imperative to understand this issue and prudent policy measures to combat climate change. This study employs a Panel VAR approach to investigate the impact of monetary policy on climate change in the East African Community (EAC). The EAC region was considered because it has been recently been considered a hotspot for climate change. The empirical evidence shows that monetary policy through the credit and interest rate channel can help smooth the transition to low-carbon economies, but at the cost of financial disruption.

Automated summary

Climate change affects everyone on the planet and efforts to combat it are crucial. Research suggests that monetary policy can aid the transition to a low-carbon economy, but may lead to financial disruption.