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Sustainable economic policies: exploring the effects of ecosystemic macroprudential regulations

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  • Laurence Scialom
  • Gaëtan Le Quang
  • Thomas Lagoarde Segot

Abstract

This paper explores the implications of ecosystemic macroprudential regulations on sustainability in an ecological PK-SFC framework. We first discuss the link between banks and global warming; and present the case for connecting prudential regulation with planetary boundaries. We then report a set of simulations suggesting that in the short run, such ecosystemic prudential regulations could effectively green banks’ balance sheets, credit flows, and curtail brown investment, at the cost, however, of significant short-run losses. In the longer run, the induced green transition appears to set the economy on a more sustainable pathway, to decrease inflationary pressures, and to maintain real GDP at the baseline level, with distributional effects favourable to wage-earners. These results highlight the relevance of ecosystemic prudential regulation to tackle climate change and call for adopting a holistic approach to sustainability policies.

Suggested Citation

  • Laurence Scialom & Gaëtan Le Quang & Thomas Lagoarde Segot, 2024. "Sustainable economic policies: exploring the effects of ecosystemic macroprudential regulations," EconomiX Working Papers 2024-28, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2024-28
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    References listed on IDEAS

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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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