Greenflation and implications for monetary policy

The recent experience with surging inflation, partly driven by supply shocks to the energy sector, has ampiflied concerns over “greenflation,” inflationary pressures resulting from the transition to sustainable energy sources. For this digest Conny Olovsson (ECB and Sveriges Riksbank) and David Vestin (Sveriges Riksbank) have curated the most recent literature on the theoretical and empirical findings on how greenflation arises and what central banks can do to curb it. They, and the papers they have chosen, highlight the central role for foresighted monetary policy as well as a smooth carbon taxation path.

Climate Stress Tests: an Overview

Climate stress tests were built to assess climate systemic risk in the financial system. They demand resources from supervisors and banks alike, but are proving useful to inform macroprudential policies.

What do we know about climate finance?

Matteo Gasparini (Oxford University) creates a map of the main branches of the climate finance literature and classifies it according to different dimensions, shedding light on the emerging strands.

Judge progress at COP27 against the demands of the science

The demand for ‘loss and damage’ finance by vulnerable developing countries is growing. This demand featured heavily at the recent COP27. Danae Kyriakopoulou (LSE Grantham Institute) shares her thoughts on its successes and failures.

Frontiers of climate and nature in macroeconomics and finance

poppy flowers and other meadow flowers with a view of the sky. Photo by Palle Knudsen.

The macroeconomic challenges from climate and nature change are constantly becoming more prevalent. At a conference hosted by the Banque de France on October 24-25, 2022, early career researchers presented cutting-edge analysis and policy solutions to tackle these challenges. This digests highlights important moments of this conference.

Climate Risks in Financial Markets

Climate change has a destabilizing effect on financial markets. If market actors become overexposed to climate-sensitive assets, the ensuing market failure provides justification for central bank intervention to prevent cascading financial effects.