Central Banking for a Social-Ecological Transformation

In the perspective of a social-ecological transformation, this article sets the discussion on the future of central banking back in the context of ecological limits to growth. It first surveys the literature on proposals to introduce sustainability in central banking. It then draws from the conceptualization of money as a social relation to discuss central banks’ mandates, independence, governance and instruments. This article therefore adopts a normative stance. Central banks should be politically accountable with a renewed governance and committees composition. In line with the endogenous nature of money, their mandate needs not to include price stability and should focus on fostering full employment, social cohesion and relevant economic development within the ecological limits of the planet. Three policy instruments are then discussed to shift the nature of central banks’ operations from responsive to prescriptive: differentiated target interest rates, credit control and qualitative tightening in assets purchasing programs.