Disruptive money: Transition risks management in monetary policy and financial regulation and growth regime stability

Oesterreichische Nationalbank (Jubiläumsfonds)

This project aims at studying the socioeconomic effects of integrating climate
and sustainability risks to monetary policy and financial regulation on prevailing
socioeconomic patterns. The intuition motivating the project is that through directing
investment towards low-carbon activities, a sustainable shift in monetary and financial rules
could entail counter-intuitive disruptions in social compromises stabilizing the prevailing
growth regimes in high income countries. These social compromises are historically based on
cheap and abundant fossil energy fueling productivity gains that support income redistribution
mechanisms and welfare-oriented states. The transformations in the growth regime induced by
the shift in the monetary and financial system is likely to disrupt historical social compromises,
potentially creating a new source of transition risk alongside economic and financial risks:
social instability. The project will address these issues through four research questions: i) The
institutional complementarity between monetary policy and financial regulation and other key
institutions (e.g. the state, work relations etc) underlying prevailing growth regimes; ii) Where
central banks and financial authorities actually stand in the integration of climate and
sustainability risks management into monetary policy and financial regulation; iii) The longterm
relations between key variables at the core of social compromises (e.g. the energyproductivity
gains-income distribution nexus) that have stabilised growth regimes until now;
iv) The potentially disruptive effects of a climate- and sustainability-aligned monetary regime
on these long-term relations and how to avoid or tame these effects.