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Climate change, monetary policy, and green finance in Latin America: the open economy dimension

In: Monetary Policy Challenges in Latin America

Author

Listed:
  • Pablo G. Bortz
  • Nicole Toftum

Abstract

The chapter reviews the alternatives available to Emerging Market Economies (EMEs) to finance the investment required to mitigate and adapt to climate change. It also takes into account the financial needs to achieve the Sustainable Development Goals. Since the requirements dwarf the financial capabilities of the public sector in EMEs, we explore possible funding channels, focusing on international financial markets. We identify potential obstacles to a smooth and sustainable finance provision, including the influence of the Global Financial Cycle on credit supply, risks related to currency mismatch and creditworthiness assessment, and mispricing of risks. The review also identifies the challenges to the exporting profile and therefore the sustainability of the balance of payments of EMEs. Finally, we provide some reflections on the limits of domestic private capital markets to bridge the “environmental financial gap,” and calls for the deeper involvement of specialized and official financial institutions.

Suggested Citation

  • Pablo G. Bortz & Nicole Toftum, 2023. "Climate change, monetary policy, and green finance in Latin America: the open economy dimension," Chapters, in: Fernando Toledo & Louis-Philippe Rochon (ed.), Monetary Policy Challenges in Latin America, chapter 10, pages 169-184, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20918_10
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    File URL: https://www.elgaronline.com/doi/10.4337/9781802200706.00023
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