IMF Working Papers

Stress Testing the Global Economy to Climate Change-Related Shocks in Large and Interconnected Economies

By Camilo E Tovar Mora, Yiqun Wu, Tianxiao Zheng

September 16, 2022

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Camilo E Tovar Mora, Yiqun Wu, and Tianxiao Zheng. Stress Testing the Global Economy to Climate Change-Related Shocks in Large and Interconnected Economies, (USA: International Monetary Fund, 2022) accessed November 21, 2024

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Summary

We stress test the global economy to extreme climate change-related shocks on large and interconnected economies. Our analysis (i) identifies large and interconnected economies vulnerable to climate change-related shocks; (ii) estimates these economies’ external financing needs-at-risk due to these shocks, and (iii) quantifies the spillovers to the global economy using a global network model. We show that large and interconnected economies vulnerable to climate change could trigger a drain of $1.8 trillion in international reserves (2 percent of 2019’s global GDP). Domestic and multilateral macroeconomic policies can help reduce these global lossess to about $0.8 trillion. The scenario highlights the importance of considering global spillovers when assessing the impact of climate change-related shocks.

Keywords: Climate change, External financing-needs-at-risk, Multilayered networks

Publication Details

  • Pages:

    33

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2022/189

  • Stock No:

    WPIEA2022189

  • ISBN:

    9798400219641

  • ISSN:

    1018-5941