The E-axes Forum on Climate Change, Macroeconomics, and Finance

Green Credit Guidance

Historically, central banks and other financial policymakers have played far larger roles in supporting structural economic transformations through the use of credit policies. In this Digest, Katie Kedward (UCL Institute for Innovation and Public Purpose) reflects upon the potential relevance of credit policies to support the green transition.

Growth and Global Warming

Ishan Nath (Federal Reserve of San Francisco) highlights the effects of global warming on economic growth and discusses why some related research reaches contradicting conclusions.

Green Investments and Rising Interest Rates

Jens van’t Klooster (University of Amsterdam) and Eric Monnet (Paris School of Economics and CEPR) look at how tight monetary policy impacts low-carbon investments. Most importantly, they suggest green credit policy instruments, central banks can use, that will enable them to address inflationary pressures without jeopardizing the long-term decarbonization of the economy.

Pricing climate-related risks into sovereign bonds

Understanding the linkages between climate vulnerability and sovereign debt risk is pivotal for countries that want to step up their climate mitigation strategies. Bhavya Gupta (National University of Singapore) and Ramkishen S. Rajan (National University of Singapore) have curated the most recent theoretical and empirical literature on the effects of climate on sovereign debt risk.

Climate Policies and Protectionism

In this brief, we ask whether the implementation of national climate policies may spur a global race to protectionism. Consumer or production subsidies and border carbon adjustments may have positive mitigation effects but can also generate trade distortions and give national industries a competitive advantage against foreign firms.

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.

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