Work

Sustainable economic policies: exploring the effects of ecosystemic macroprudential regulations

Year: 2025

Type: article

Abstract: This paper explores the contribution of ecosystemic macroprudential regulations to the sustainable development goals in an ecological PK-SFC framework. We first discuss the link between banks and global warming; and present the case for connecting prudential regulation with planetary boundaries. We then report a set of simulations suggesting that in the short run, such ecosystemic prudential regulations could effectively green banks’ balance sheets and credit flows, and curtail brown investment; at the cost, however, of significant short-run output losses. In the longer run, the induced green transition sets the economy on a sustainable pathway, decreases inflationary pressures, and maintains real GDP at the baseline level, with favorable distributional effects for wage-earners. These results highlight the importance of a paradigm shift in prudential regulation in the fight against climate change.

Source: Journal of Post Keynesian Economics

DOI: 10.1080/01603477.2025.2544047

Authors: Thomas Lagoarde-Ségot, Gaëtan Le Quang, Laurence Scialom

Institutions: Kedge Business School, Université Paris Nanterre, EconomiX

Language: English

Topic: Sustainable Finance and Green Bonds

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Responsible consumption and production, Decent work and economic growth

Open Access status: green

Funder: Fondation du Risque