Let's Talk About the Weather: The Impact of Climate Change on Central Banks

  title={Let's Talk About the Weather: The Impact of Climate Change on Central Banks},
  author={Sandra Batten and Rhiannon Sowerbutts and Misa Tanaka},
  journal={SRPN: Carbon Reduction (Topic)},
This paper examines the channels via which climate change and policies to mitigate it could affect a central bank’s ability to meet its monetary and financial stability objectives. We argue that two types of risks are particularly relevant for central banks. First, a weather-related natural disaster could trigger financial and macroeconomic instability if it severely damages the balance sheets of households, corporates, banks, and insurers (physical risks). Second, a sudden, unexpected… 
Climate change: policies to manage its macroeconomic and financial effects
It is increasingly recognized that climate change generates major macroeconomic and financial risks. There are physical risks associated to the disasters generated by hydrometeorological events and
Climate Change: Macroeconomic Impact and Implications for Monetary Policy
Climate change and policies to mitigate it could affect a central bank’s ability to meet its monetary stability objective. Climate change can affect the macroeconomy both through gradual warming and
Price Stability and Climate Risks: Sensible Measures for the European Central Bank
By the end of 2020, the European Central Bank (ECB) will present the results of its monetary policy strategy review. What changes are to be expected and what changes are needed? This report covers
Analysis Climate Change , Financial Stability and Monetary Policy
Using a stock-flow-fund ecological macroeconomic model, we analyse (i) the effects of climate change on financial stability and (ii) the financial and global warming implications of a green
The Impact of Climate Risks on the Insurance and Banking Industries
It is now largely recognised that the global climate has changed since the pre-industrial period. While the role of financial institutions in the transition to a low-carbon economy has received
Don’t Forget Climate Sentiments: Real and Financial Markets’ Reactions to Climate Risks
Policy makers and financial regulators are increasingly concerned about the impact of climate physical and transition risks on economic growth and financial stability. The introduction of timely and
Climate Risk and Financial Stability in the Network of Banks and Investment Funds
We develop a method to analyze the effects on financial stability of the interplay between climate policy shocks and market conditions. We combine the frameworks of the Climate Stress-test with the
How Does Climate Change Interact with the Financial System? A Survey
We survey the growing literature on the interaction between climate change, which is likely associated with a growing intensity and frequency of natural disasters, and the financial system. Assets,


A climate stress-test of the financial system
The urgency of estimating the impact of climate risks on the financial system is increasingly recognized among scholars and practitioners. By adopting a network approach to financial dependencies, we
Climate Change and the Macro-Economy: A Critical Review
Climatic factors can directly affect economic outcomes such as output, investment and productivity, and understanding the economic consequences of climate change is becoming a necessity not just for
Financial fragility and natural disasters: An empirical analysis
Unmitigated Disasters? New Evidence on the Macroeconomic Cost of Natural Catastrophes
This paper presents a large panel study on the macroeconomic consequences of natural catastrophes and analyzes the extent to which risk transfer to insurance markets facilitates economic recovery.
Catastrophic Risk and Credit Markets
We provide a model of the effects of catastrophic risk on real estate financing and prices and demonstrate that insurance market imperfections can restrict the supply of credit for
Tracing Out Capital Flows: How Financially Integrated Banks Respond to Natural Disasters
Multi-market banks reallocate capital when local credit demand increases after natural disasters. Using property damage as an instrument for lending growth, we find credit in unaffected but connected
How Do Banks React to Increased Asset Risks? Evidence from Hurricane Katrina
The instability of banks during the recent financial crisis underlines the importance of understanding how banks determine their capital ratios. This paper conducts the first empirical assessment on
Insurance and financial stability
The major shocks that hit the insurance sector have raised questions as to the role of this sector in financial stability and as to whether it is a potential source of systemic risk. The complexity
On climate change and economic growth
Monetary Policy and Natural Disasters in a DSGE Model
In the immediate aftermath of Hurricane Katrina, speculation arose that the Federal Reserve might respond by easing monetary policy. This article uses a dynamic stochastic general equilibrium (DSGE)