Tag: Real economy

Adaptation is to mitigation what Robin is to Batman

Jenny Clark and Theresa Löber

The UK’s climate continues to change, getting wetter and warmer, with extremes becoming ever more pronounced. Even if we limit global warming to 1.5°C above pre-industrial levels, experts warn that we’ll see the number and severity of extreme weather events increase further. Without adaptation, we will see more property, infrastructure and agriculture damaged or destroyed, with devastating consequences to households, communities and businesses – as well as increasing risks to economic and financial stability. To date there has been relatively more focus on mitigation and the transition to net zero than on adaptation and addressing physical risk, across both government and the private sector. Adaptation is mitigation’s sidekick, we need them to consistently work together to achieve better outcomes. Much like Batman and Robin.

Continue reading “Adaptation is to mitigation what Robin is to Batman” →

Trapped in a web of debt? Inefficiencies from corporate debt and the potential case for macroprudential intervention

Emily Clayton and Martina Fazio

Debt creates threads between the financial system and the real economy. These threads transmit shocks across a web of connections, meaning that financial shocks may pose risks to households and businesses, and real-economy shocks may jeopardise financial stability. These threads can also become entangled into knots – sources of inefficiency. Macroprudential regulators in the UK have already intervened partially to disentangle the inefficiency from consumption cuts by over-indebted households. In the next decade, policymakers could consider whether a similar intervention is needed to limit corporate debt. In this post, we map the threads that corporate debt creates, identifying areas where entanglement may have created inefficiencies, and considering the potential case for borrower-based tools to unravel them.

Continue reading “Trapped in a web of debt? Inefficiencies from corporate debt and the potential case for macroprudential intervention” →