Climate Change, Financial Stability and Monetary Policy

Dafermos, Yannis; Nikolaidi, Maria; Galanis, Giorgos

doi:10.1016/j.ecolecon.2018.05.011

Cited by 453 publications

(205 citation statements)

References 33 publications

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“…A possible explanation for this neglect is related to the models traditionally used by central banks, which "are not well suited to capturing the effects of climate change or the complexity of the economic transition" (Sevillano and Gonzalez, 2018, p.129). Indeed, only recently a new generation of models has been developed to account for the effects of climate change on financial and economic stability (Balint et al, 2017;Fontana and Sawyer, 2016;Dafermos et al, 2017Dafermos et al, , 2018Monasterolo and Raberto, 2018;Bovari et al, 2018;Lamperti et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies?

D’Orazio¹,

Popoyan

2019

Ecological Economics

218

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. AbstractWhile there is a growing debate among researchers and practitioners on the possible role of central banks and financial regulators in supporting a smooth transition to a low-carbon economy, the information on which macroprudential instruments could be used for reaching the "green structural change" is still quite limited. Moreover, the achievement of climate goals is still affected by the so-called "green finance gap". The paper addresses these issues by proposing a critical review of existing and novel prudential approaches to incentivizing the decarbonization of banks' balance sheets and align finance with sustainable growth and development objectives. The analysis carried out in the paper allows understanding under which conditions macroprudential policy could tackle climate change and promote green lending, while containing climate-related financial risks. JEL Classification: E50, E52, G28, Q50, Q58

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Section: Introductionmentioning

confidence: 99%

Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies?

D’Orazio¹,

Popoyan

2019

Ecological Economics

218

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“…We use a sound accounting and theoretical framework to carve out policy pathways for "mission-oriented" public and private investment in response to SDGs. In so doing, we contribute to recent research in ecological post-Keynesian macroeconomics [16] and to the discussion of policy proposals recently put forth by independent think-tanks and civil organizations [17,18].Our central thesis is that the SDG financing gap is primarily the result of an optical illusion created by looking at sustainable finance through the prism of the loanable fund theory. The biggest obstacle to financing the SDGs may not be the scarcity of money, or the unavailability of policy options, but, rather, our economic zeitgeist.…”

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confidence: 96%

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confidence: 99%

Financing the Sustainable Development Goals

Lagoarde‐Segot

2020

Sustainability

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This paper contends that carving out pathways to finance the sustainable development goal (SDG) agenda entails to reconsider tacit assumptions regarding the functioning of financial systems. We first use a history of economic thought perspective to demonstrate the flaws of the loanable fund theory, which has come to underlie SDG finance strategies. We then introduce the alternative endogenous money theory using a consistent theoretical and accounting framework. This allows us to identify and discuss a set of financing mechanisms that would permit to bridge the SDG budget gap. These mechanisms include the issuing of sovereign green bonds, the modification of the European Central Bank's collateral framework, changes in capital adequacy ratios, a market of SDG lending certificates and the introduction of rediscounting policies. We back up the discussion with examples from economic history.Sustainability 2020, 12, 2775 2 of 22 that market prices signal the true value of financial assets, and that social welfare results from the maximization of investor wealth) need to be re-examined [12].It is within this broader context that this paper seeks to make three specific contributions to the literature on SDG finance. First, we contend that bridging the SDG finance gap requires excavating-and critically assessing-a set of tacit beliefs, which seemingly underlie the current framing of finance research and policies. Social studies of finance have indeed established that the behavior of actors (and the legal/technical system within which they operate) is shaped by underlying theoretical representations [12][13][14]. As stated in Chambost et al. (2019, p.3): "financial theories are embodied in tools, rules and artefacts acting as vectors influencing and legitimizing financial practices". We hope to fill a gap in this literature by showing that one specific conception of money and finance-the loanable fund theory (LFT)-has fundamentally influenced economic policy over the course of the past four decades.Second, we use a history of economic thought perspective-going back to the original texts-to show that the LFT does not properly account for the mechanisms of credit creation, and provides, overall, an inaccurate portrayal of the relationship between finance, savings, interest rates and investment in the real world. Several major economists (Schumpeter, Wicksell, Keynes) and central bankers around the world, have repeatedly demonstrated the logical flaws of the loanable fund theory [15]. This leads us to highlight that the LFT is a powerful-yet concealed-mental hindrance to the development of appropriate SDG finance policies.Third, we offer an in-depth discussion of the alternative endogenous money theory championed by post-Keynesian authors. We use a sound accounting and theoretical framework to carve out policy pathways for "mission-oriented" public and private investment in response to SDGs. In so doing, we contribute to recent research in ecological post-Keynesian macroeconomics [16] and to the discussion of policy proposals...

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“…The setting of the improved energy efficiency (2) seems ad hoc. Actually, it is motivated by the logistic form, as seen in Dafermos et al [51]. Since we focus on the effect of loaning scales in the green innovation project, the loaning scale should be a variable influencing the improvement of energy efficiency through technological innovation.…”

Section: Baseline Modelsmentioning

confidence: 99%

Lending Interest Rate, Loaning Scale, and Government Subsidy Scale in Green Innovation

et al. 2019

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Green loans are a way of financing green innovation. Two important factors, the lending interest rate and the loaning scale, should be focused on. In this paper, we explore the impact of lending interest rates and loaning scale on green innovation. We show that the incentive of green innovation strongly depends on the lending interest rate and the loaning scale through model analysis. Moreover, the dependence is summarized as a two-step strategy. In the first step, the lending interest rate should be lower than some rate thresholds given in the paper. Otherwise, green innovation fails to be stimulated. In the second step, if the lending interest rate is lower than the given rate threshold, then the practical loaning scale should lie between two thresholds of loaning scale derived in the paper, such that the green innovation will be stimulated. What is more, to guarantee the green effect of the innovation on the environment, we construct a threshold of loaning scale. If the loaning scale is larger than this threshold, then the innovation will show green effect on the environment. Otherwise, green innovation loses its environmental significance. The government stimulates green innovation through government subsidy. In this paper, we consider three kinds of government subsidy, including a subsidy for the bank, subsidy for the enterprise before and after implementing green innovation. Some appropriate government subsidy scales are presented.

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Climate Change, Financial Stability and Monetary Policy

Cited by 453 publications

References 33 publications

Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies?

Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies?

Financing the Sustainable Development Goals

Lending Interest Rate, Loaning Scale, and Government Subsidy Scale in Green Innovation

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