# How Effective is Monetary Policy for Macroeconomic Stabilisation when Environmental Sustainability is a Central Bank Objective?

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### Title

How Effective is Monetary Policy for Macroeconomic Stabilisation when Environmental Sustainability is a Central Bank Objective?

### Subject

How Effective is Monetary Policy for Macroeconomic Stabilisation when Environmental Sustainability is a Central Bank Objective?

### Date

2025

### Contributor

Soham Warikoo and Monisha Pandhi

### Abstract

This paper examines how central banks integrating sustainability initiatives into monetary policy affects macroeconomic stability. Using quarterly data for 184 countries from 2001 to 2024, we assess whether membership in the Network for Greening the Financial System (NGFS), as a proxy to show whether a central bank is sustainable, influences five macroeconomic variables: inflation, inflation volatility, GDP growth, GDP volatility, and unemployment. A series of pooled OLS and fixed effects regressions are used, while semi-structured interviews with central bank officials complement the quantitative analysis. The results indicate that NGFS membership is generally associated with greater macroeconomic stability in high-income economies, reflected in lower inflation, stronger growth, and reduced volatility. Interviewees from high- and middle-income countries agreed that their central banks did not recognise a trade-off between sustainability in central banking, and the effectiveness of monetary policy. However, regression results indicate that middle- and low-income countries experience trade-offs, possibly due to weaker institutional capacity and resource constraints.

### Meta Tags

Economics, Monetary Policy, Sustainability, Sustainable Monetary Policy, Central Banking, Macroeconomics, Central Banks

### Files

### Collection

[Social Sciences](https://urss.warwick.ac.uk/collections/show/1)

### Citation

Soham Warikoo, “How Effective is Monetary Policy for Macroeconomic Stabilisation when Environmental Sustainability is a Central Bank Objective?,” *URSS SHOWCASE*, accessed March 16, 2026, https://urss.warwick.ac.uk/items/show/1044.

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