Using a range of calculative devices, (Mis)managing Macroprudential Expectations explores the methods used by central banks to predict and govern the tail risks that could impact financial stability. Through an in-depth case study, the book utilises empirically-informed theoretical analysis to capture these low-probability and high-impact events, and offers a novel conceptualisation of the role of risk modelling within the macroprudential policy agenda.
The book asserts that central banks efforts to capture tail risks go beyond macroprudential policy objectives of identifying and monitoring systemic risks to financial stability. It illustrates how the calculation of tail risk contributes to managing the expectations that regulated institutions have around the Bank of Englands macroprudential approach, its willingness to support struggling institutions, and its use of novel macroprudential policy tools. Situating tail risk within the broader realm of climate finance, chapters contend that the identification of future climate tail risks simultaneously reveals opportunities for private profit and non-bank lending within the financial system, in ways that are potentially destabilizing. The book concludes by highlighting the social and political limitations of central banks new macroprudential approach.
Transdisciplinary in approach, this book will be invaluable to students and scholars interested in the intersections between climate studies, political science and public policy, environmental economics, banking and finance, and political economy. Its practical applications will also be a useful resource to climate and finance policymakers working in central banking.
Introduction to (Mis)managing Macroprudential Expectations: the turn to tail risk PART I MANAGING MACROPRUDENTIAL EXPECTATIONS 2. Macroprudential expectations management 3. Cyclical tail risk 4. Exploratory tail risk PART II MISMANAGING CARBON FUTURES 5. Climate tail risks 6. Monitoring or marketing climate tail risks? 7. Shadow banking and carbon transition risk 8. Conclusions Bibliography Index
