Rabah Arezki, 20 April 2020

COVID-19 will precipitate ‘peak demand’ for oil with dramatic consequences on oil-exporting countries in the short and medium run. This column provides a perspective on the role of monetary policy in these countries at different horizons. In the short run, (independent) monetary policy should flexibly target inflation. In the medium run, central banks need to coordinate with fiscal authorities to ensure that monetary policy operates around a credible and sustainable fiscal anchor. In the long run, central banks should beware of the existential threats posed by new risks related to stranded assets.

Manthos Delis, Kathrin de Greiff, Steven Ongena, 27 May 2018

Neglecting the possibility that fossil fuel reserves can become ‘stranded’ could result in a ‘carbon bubble’ as fossil fuel firms become overvalued. This column studies whether banks price the climate policy risk of fossil fuel firms. Prior to 2015, banks did not appear to price climate policy risk. After 2015, however, the risk is priced to a certain extent, especially for firms holding more fossil fuel reserves.

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