We quantify green fiscal multipliers by constructing country-specific, residual-based shocks to environmental protection expenditures, and trace their effects on macroeconomic and environmental outcomes. Our estimates imply that an unexpected 1 percentage point of GDP increase in environmental spending lowers real GDP per capita growth by about 2.6 pp globally. The findings imply that green fiscal policy should be carefully sequenced and tailored to country conditions to manage net benefits. For central banks, green fiscal expansions should be incorporated into the assessment of the effectiveness and transmission of monetary policy. Doing so will support price and financial stability during the transition to a low-carbon economy.
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