Löscher, A and Kaltenbrunner, A orcid.org/0000-0003-3519-5197 (2023) Climate change and macroeconomic policy space in developing and emerging economies. Journal of Post Keynesian Economics, 46 (1). pp. 113-141. ISSN 0160-3477
Abstract
This paper addresses the macroeconomic challenges stemming from the double affectedness of climate change and dependence on external finance in peripheral countries. The paper uses the Post-Keynesian concept of an asset’s own rate of return to assess how susceptibility to the combined effects of erratic capital flows and the vulnerability vis-à-vis the physical and transitional risks of climate change reduces macroeconomic policy space. Climate change and mitigation strategies are said to contribute to financial instability ensuing flight-to-quality of international investors. This translates into higher external financial fragility in low income countries with a high degree of commodity dependence—with increased exchange rate volatility and devaluating pressure deteriorating affected countries’ currencies’ liquidity premia and the expectation of their short-term exchange rates as result. Consequently, policy-makers in affected countries are forced to commit to investor-friendly policies and high interest rates to uphold their currencies’ acceptance. The susceptibility to the physical risks of climate change and mitigation hence contributes to the self-perpetuating nature of international monetary asymmetries and hierarchies.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2022 Taylor & Francis Group, LLC. This is an author produced version of an article published in Journal of Post Keynesian Economics. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Climate change; policy space; commodity dependence; financial subordination; currency hierarchy |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Economics Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 14 Jun 2022 10:50 |
Last Modified: | 23 Dec 2023 01:13 |
Status: | Published |
Publisher: | Taylor & Francis |
Identification Number: | 10.1080/01603477.2022.2084630 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:187705 |