Climate change is one of the greatest challenges of this century. Mitigation requires a large-scale
transition to a low-carbon economy. This paper provides an overview of the rapidly
growing literature on the role of macroeconomic and financial policy tools in enabling this
transition. The literature provides a menu of policy tools for mitigation. A key conclusion is
that fiscal tools are first in line and central, but can and may need to be complemented by
financial and monetary policy instruments. Some tools and policies raise unanswered
questions about policy tool assignment and mandates, which we describe. The literature is scarce, however, on the most effective policy mix and the role of mitigation tools and goals
in the overall policy framework.
International Monetary Fund. Strategy, Policy, & Review Department
While the IMF has been involved in the climate debate since at least 2008, a systematic account of how to integrate climate change into surveillance has been lacking to date. This paper seeks to fill the gap. It argues that domestic policy challenges related to climate change—such as adaptation efforts for climate vulnerable countries, or policies to deliver a country’s Nationally Determined Contribution under the Paris climate accord—are covered by the IMF’s bilateral surveillance mandate and therefore valid topics for Article IV consultations wherever these challenges cross the threshold of macro-criticality. Climate change mitigation is a global policy challenge and therefore falls under multilateral surveillance. The paper proposes a pragmatic approach that focusses especially on the mitigation efforts of the 20 largest emitters of greenhouse gases.
This paper examines credit conditions and recoveries from financial crises. The paper highlights that the prospects for recovery from the 2008 global financial crisis appear to be on the horizon. The paper discusses that the question—what determines the path of recovery from a recession associated with a financial crisis—is of utmost importance as policymakers debate how soon to withdraw the extraordinary monetary and fiscal stimulus that were put in place soon after the onset of the crisis. The paper also analyzes inflation targeting in emerging economies.