Effects of climate change on monetary policy and financial system

The climate change resulting from global warming affects the field of activity of humanity as a whole, especially the natural system, social structure, asset classes, industrials and economies. Accordingly, scientists are investigating these effects of climate change. According to these researches, climate change is a global problem that needs to be solved urgently with macroeconomic effects on price stability, financial stability, monetary stability, economic growth and sustainable development. For this reason, the main purpose of this research is determined as analyzing the effects of global climate change on monetary policy. In line with this basic goal, the effects of climate change on monetary policy are tested using the panel data analysis method. In line with this basic goal, the effects of climate change on monetary policy are tested using the panel data analysis method. After this analysis, which covers the period 1992-2021 and 33 countries, some important results are reached. The first of these is the detection of a strong and positive significant relationship between carbon dioxide emissions, which express the amount of carbon dioxide gas released into the atmosphere, and the policy interest rate of central banks. The second is the detection of a strong and positive significant relationship between the inflation rate, which is included in the econometric model as a control variable, and the policy interest rate of central banks. As a result, not only the effectiveness of central banks, whose main goals are price stability and financial stability, in conducting monetary policy decreases, but also the interest rates and borrowing costs of commercial banks increase. When all these are evaluated as a whole, it is seen that both monetary policies and monetary policy instruments need to be greened in order to carry out monetary policy strongly and effectively in the fight against climate change.