Monday , October 18 2021
Home / Amol Agrawal: Mostly Economics / Do Banks Price Environmental Transition Risks? Evidence from a Quasi-Natural Experiment in a Chinese Province

Do Banks Price Environmental Transition Risks? Evidence from a Quasi-Natural Experiment in a Chinese Province

Summary:
Bihong Huang ; Maria Teresa Punzi ; Yu Wu in this IMF working paper: This paper assesses the financial risks arising from transition toward a low-emission economy. The environmental DSGE model shows tightening environmental regulation impairs firms’ balance sheets, and consequently threatens financial stability in the short term. The empirical analysis indicates that following the implmentation of Clean Air Action Plan, the default rates of high-polluting firms in a Chinese province rose by around 80 percent. Joint equity commercial banks with higher level of independence were able to appropriately price in their exposure to transition risks, while the Big Five commercial banks failed to factor in such risks. This entry was

Topics:
Amol Agrawal considers the following as important: , , ,

This could be interesting, too:

Amol Agrawal writes The Effectiveness of Job-Retention Schemes during the pandemic: Evidence from Germany

Amol Agrawal writes Ageing and the real interest rate in Japan: A labour market channel

Amol Agrawal writes Denmark Central Bank’s Gold – A historical overview

Amol Agrawal writes Should Keynes’s General Theory book have been titled instead as ‘Special Theory of Employment, Interest and Money’?

Bihong Huang ; Maria Teresa Punzi ; Yu Wu in this IMF working paper:

This paper assesses the financial risks arising from transition toward a low-emission economy.

The environmental DSGE model shows tightening environmental regulation impairs firms’ balance sheets, and consequently threatens financial stability in the short term.

The empirical analysis indicates that following the implmentation of Clean Air Action Plan, the default rates of high-polluting firms in a Chinese province rose by around 80 percent.

Joint equity commercial banks with higher level of independence were able to appropriately price in their exposure to transition risks, while the Big Five commercial banks failed to factor in such risks.

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

Leave a Reply

Your email address will not be published. Required fields are marked *