Climate prudential policies could ‘backfire’, IMF economists warn

Climate change

Central banks should be careful when implementing ‘green’ macro-prudential policies as they could “backfire” if underlying risks are not properly understood, according to the International Monetary Fund.

Recent research by Pierpaolo Grippa, Jochen Schmittmann, and Felix Suntheim notes central banks have started to take stock of the financial stability implications of climate change, but should not be hasty in implementing policy.

“Efforts to incorporate climate-related risks into regulatory

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