Coping With Collapse: A Stock-Flow Consistent Monetary Macrodynamics of Global Warming

By Emmanuel Bovari, Gaël Giraud, Florent Mc Isaac. 2018

120 citations recorded by the source corpus.

This paper presents a macroeconomic model that combines the economic impact of climate change with the pivotal role of private debt. Using a Stock-Flow Consistent approach based on the Lotka–Volterra logic, we couple its nonlinear monetary dynamics of underemployment and income distribution with abatement costs. A calibration of our model at the scale of the world economy enables us to simulate various planetary scenarios. Our findings are threefold: 1) the +2 °C target is already out of reach, absent negative emissions; 2) the long-term (resp. short-term) results of climate change on economic fundamentals may lead to severe economic consequences without the implementation (resp. in case of too rapid an application) of proactive climate policies. Global warming (resp. too fast transition) forces the private sector to leverage in order to compensate for output and capital losses (resp. to lower carbon emissions), thus endangering financial stability; 3) Implementing an adequate carbon price trajectory, as well as increasing the wage share, fostering employment, and reducing private debt make it easier to avoid unintended degrowth and to reach a +2.5 °C target.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/00a24e526143b0c87049ef16e8c43eba43a58a5f

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis (2020, unknown): “38 For an SFC model that follows more closely the approach of the standard IAMs, see Bovari et al. (2018a), Bovari et al. (2018b) and Bovari et al.”
The impact of phasing out fossil fuel subsidies on the low-carbon transition (2019, background): “The focus on the behavioral and financial aspects of energy policies represents a novelty in the Post-Keynesian tradition on which the model is grounded (Caverzasi and Godin, 2014; Dafermos et al., 2017; Bovari et al., 2018; Ponta et al., 2018).”
Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies? (2019, background): “We consider these questions of particularly relevance because, as pointed out by Carney (2015), the “green transformation” of the global economy may occur paired with high market volatility and disturbances in capital flows, causing systemic risks for the financial sector.”
Climate Change, Financial Stability and Monetary Policy (2018, unknown): “Less attention has been paid to the detailed analysis of physical risks, which have only partially been explored in macro models by Dietz et al. (2016), Dafermos et al. (2017) and Bovari et al. (2018).”