Climate risk and IMF surveillance policy: a baseline analysis

Luma Ramos, Kevin P. Gallagher, Corinne Stephenson and Irene Monasterolo

Climate Policy, 2022, vol. 22, issue 3, 371-388

Abstract: The International Monetary Fund (IMF) has been tasked with quickly devising a climate change strategy that helps its members meet collective climate change and development goals while maintaining financial stability. In this paper, we develop an analytical framework of the ‘macro-critical’ nature of climate change and use that framework to examine the extent to which the IMF has incorporated the macro-economic aspects of climate change in recent years. We deploy textual analysis algorithms to perform a baseline analysis of the extent to which the IMF’s main bilateral surveillance activities—Article IV reports and Financial Sector Assessment Programs (FSAPs)—have focused on climate risks between 2017 and 2021. We find that IMF surveillance activity has paid little and uneven attention to climate risks in Article IV reports, and even less so in FSAPs. However, recent Article IV and FSAP assessments have piloted climate risk analyses that present an opportunity to be expanded and incorporated systematically. The analytical framework, baseline analysis, and methodology will allow future analysts to monitor IMF climate performance over time.Key policy insightsMultilateral institutions should analyze and incorporate ‘macro-critical’ climate risks to fiscal and financial systems in their policy frameworks toolkit.The IMF needs to rapidly fill this gap in the climate policy architecture through reforms to its surveillance, advisory, and lending functions.The IMF, as a safeguard of monetary and financial stability, should incorporate climate risks cohesively and comprehensively into its analysis, including spillover or the cross-border consequences of climate change, and reallocate its tools and resources to this end.This paper provides a method and baseline from which to evaluate the evolution of IMF policy toward incorporating climate risk into its bilateral surveillance toolkit, specifically Article IV exercises and FSAPs.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/14693062.2021.2016363 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:tcpoxx:v:22:y:2022:i:3:p:371-388

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/tcpo20

DOI: 10.1080/14693062.2021.2016363

Access Statistics for this article

Climate Policy is currently edited by Professor Michael Grubb

More articles in Climate Policy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().