PSE Internal Seminar

Du 31/05/2024 de 12:00 à 13:00

GRITTERSOVA Jana(PSE)
GRENET Julien(PSE)

Fifty shades of green: Central bank communication about climate change and inflation expectations

This study explores how central banks discuss climate change and whether such communication affects the behavior and expectations of financial markets. Specifically, it examines whether the frequency of central bank communication on climate-related risks influences the inflation expectations of financial markets. Central bank communication about climate change can influence these expectations by creating uncertainty about future climate policies that the central bank might adopt. When a central bank incorporates climate objectives into its policy discourse, it creates uncertainty among financial market participants about its commitment to its mandates, such as maintaining price stability and safeguarding central bank autonomy. There is also the concern that the central bank could be perceived as the last resort to rescue the financial system in the face of climate-induced risks. To investigate this, we compiled a comprehensive database of speeches addressing climate change by representatives of the European Central Bank and national central banks of the eurozone countries from January 2008 to December 2022. This dataset enables us to examine how central bankers' speeches influence private inflation expectations, as measured by market-based indicators. Using local projections, we find that more frequent speeches on climate change and higher intensity of climate-related language within speeches are associated with increased inflation expectations among financial market participants across various maturity horizons, spanning from one year to ten years. Moreover, we found that the effect of these speeches varies depending on the speaker; notably, speeches delivered by representatives of central banks from the founding members of the eurozone influence shifts in inflation expectations. This holds true even when accounting for macroeconomic surprises, central bank interest rate decisions, and a range of other factors. Overall, our findings suggest that central bank discourse on climate change offers valuable insights into future financial market inflation expectations. Co-authors: Eleonora Mavroeidi (Bloomberg Paris) and Murilo Silva (University of California, Riverside) ************************ This paper investigates whether social desegregation in schools fosters social cohesion and reduces social inequality in educational outcomes. We analyze an initiative launched in 2015 by the French Ministry of Education to desegregate public middle schools, by comparing the schools that participated in the program with similar schools that were not involved. Our findings indicate that in the initially more segregated schools, the program was successful at increasing the exposure of low-SES to high-SES students, and vice versa. Using detailed administrative data along with survey data on students' wellbeing and attitudes, we find that school desegregation does not adversely affect the academic performance of high-SES students, while it positively affects their academic self-esteem. Although our results do not reveal significant short-run effects on the academic performance of low-SES students, we find that they derive social and psychological benefits from being exposed to a more diverse student body. Co-authors: Ghazala Azmat (Sciences Po), Élise Huillery (Université Paris Dauphine), Youssef Souidi (Université Paris Dauphine), and Yann Algan (HEC).