Stress Testing the Global Economy to Climate Change-Related Shocks in Large and Interconnected Economies

• Author(s): Camilo Tovar Mora, Mr. Camilo E Tovar Mora, Mr. Yiqun Wu, Tianxiao Zheng,
• Publisher: International Monetary Fund
• Pages: 32
• ISBN_13: 9798400219641
  
• Language: en
• Categories: Business & Economics / Finance / General , Business & Economics / Economics / Macroeconomics , Business & Economics / Economics / General , Business & Economics / Environmental Economics , Nature / Natural Disasters , Political Science / Public Policy / Environmental Policy ,

Description:... We stress test the global economy to extreme climate change-related shocks on large and interconnected economies. Our analysis (i) identifies large and interconnected economies vulnerable to climate change-related shocks; (ii) estimates these economies’ external financing needs-at-risk due to these shocks, and (iii) quantifies the spillovers to the global economy using a global network model. We show that large and interconnected economies vulnerable to climate change could trigger a drain of $1.8 trillion in international reserves (2 percent of 2019’s global GDP). Domestic and multilateral macroeconomic policies can help reduce these global lossess to about $0.8 trillion. The scenario highlights the importance of considering global spillovers when assessing the impact of climate change-related shocks.