TY - JOUR
T1 - Longer-term structural transitions and short-term macroeconomic adjustment
T2 - quantitative implications for the global financial system
AU - McKibbin, Warwick
AU - Vines, David
N1 - Publisher Copyright:
© The Author(s) 2023. Published by Oxford University Press.
PY - 2023
Y1 - 2023
N2 - This paper provides quantitative modelling of the effect of three longer-term global transitions: the global demographic transition involving a marked reduction in population growth; a long-term slowdown in productivity growth which may continue, or may conceivably be reversed; and the disruption in the global economy due to increasing climate shocks and the implementation of climate policies that will be needed to reach net-zero emissions by 2050. We study the global investment needs to which these transitions will lead. We demonstrate that these investment needs will be both asymmetric across countries and over time. This asymmetry will lead to potentially large changes in trade flows and significant financial capital flows across national borders, and also to substantial real exchange changes and interest rate movements. The resulting large movements in international capital flows will have significant implications for the global financial system, which we demonstrate at the country and regional level.
AB - This paper provides quantitative modelling of the effect of three longer-term global transitions: the global demographic transition involving a marked reduction in population growth; a long-term slowdown in productivity growth which may continue, or may conceivably be reversed; and the disruption in the global economy due to increasing climate shocks and the implementation of climate policies that will be needed to reach net-zero emissions by 2050. We study the global investment needs to which these transitions will lead. We demonstrate that these investment needs will be both asymmetric across countries and over time. This asymmetry will lead to potentially large changes in trade flows and significant financial capital flows across national borders, and also to substantial real exchange changes and interest rate movements. The resulting large movements in international capital flows will have significant implications for the global financial system, which we demonstrate at the country and regional level.
KW - climate physical risk
KW - climate transition risk
KW - global demographic transition
KW - global productivity
KW - international capital flows
KW - real exchange rates
KW - real interest rates
UR - http://www.scopus.com/inward/record.url?scp=85160084356&partnerID=8YFLogxK
U2 - 10.1093/oxrep/grad004
DO - 10.1093/oxrep/grad004
M3 - Article
SN - 0266-903X
VL - 39
SP - 245
EP - 266
JO - Oxford Review of Economic Policy
JF - Oxford Review of Economic Policy
IS - 2
ER -