Moving Out of a Flood Zone? That May Be Risky!
An often-overlooked aspect of flood-plain mapping is the fact that these maps designate stark boundaries, with households falling either inside or outside of areas designated as “flood zones.” Households inside flood zones must insure themselves against the possibility of disasters. However, costly insurance may have pushed lower-income households out of areas officially designated a flood risk and into physically adjacent areas. While not designated an official flood risk, Federal Emergency Management Agency (FEMA) and disaster data shows that these areas are still at considerable risk of flooding. In this post, we examine whether flood maps may have inadvertently clustered those households financially less able to bear the consequences of a disaster into areas that may still pose a significant flood risk.
CRISK: Measuring the Climate Risk Exposure of the Financial System
A growing number of climate-related policies have been adopted globally in the past thirty years (see chart below). The risk to economic activity from changes in policies in response to climate risks, such as carbon taxes and green subsidies, is often referred to as transition risk. Transition risk can adversely affect the real economy through […]
Is the Green Transition Inflationary?
Are policies aimed at fighting climate change inflationary? In a new staff report we use a simple model to argue that this does not have to be the case. The model suggests that climate policies do not force a central bank to tolerate higher inflation but may generate a trade-off between inflation and employment objectives. The presence and size of this trade-off depends on how flexible prices are in the “dirty” and “green” sectors relative to the rest of the economy, and on whether climate policies consist of taxes or subsidies.
Small Business Recovery after Natural Disasters
The first post of this series found that small businesses owned by people of color are particularly vulnerable to natural disasters. In this post, we focus on the aftermath of disasters, and examine disparities in the ability of firms to reopen their businesses and access disaster relief. Our results indicate that Black-owned firms are more likely to remain closed for longer periods and face greater difficulties in obtaining the immediate relief needed to cope with a natural disaster.
How Do Natural Disasters Affect U.S. Small Business Owners?
Recent research has linked climate change and socioeconomic inequality (see here, here, and here). But what are the effects of climate change on small businesses, particularly those owned by people of color, which tend to be more resource-constrained and less resilient? In a series of two posts, we use the Federal Reserve’s Small Business Credit Survey (SBCS) to document small businesses’ experiences with natural disasters and how these experiences differ based on the race and ethnicity of business owners. This first post shows that small firms owned by people of color sustain losses from natural disasters at a disproportionately higher rate than other small businesses, and that these losses make up a larger portion of their total revenues. In the second post, we explore the ability of small firms to reopen and to obtain disaster relief funding in the aftermath of climate events.
Climate Change: Implications for Macroeconomics
What are the implications of climate change, and climate change–related policies, for macroeconomics in general and monetary policy in particular? This is the key question debated at a recent symposium on “Climate Change: Implications for Macroeconomics” organized by the Applied Macroeconomics and Econometrics Center (AMEC) of the New York Fed on May 13. This post briefly summarizes the content of the discussion and provides links to recordings of the various sessions and the participants’ slides.
The Adverse Effect of “Mandatory” Flood Insurance on Access to Credit
The National Flood Insurance Program (NFIP) was designed to reduce household and lender flood-risk exposure and “encourage lending.” In this post, which is based on our related study, we show that in certain situations the program actually limits access to credit, particularly for low-income borrowers—an unintended consequence of this well-intentioned program.
Climate Change and Financial Stability: The Weather Channel
Climate change could affect banks and the financial systems they anchor through various channels: increasingly extreme weather is one (Financial Stability Board, Basel Committee on Bank Supervision). In our recent staff report, we size up this channel by studying how U.S. banks, large and small, fared against disasters past. We find even the most destructive disasters had insignificant or small effects on bank stability and small and positive effects on bank income. We conjecture that recovery lending after disasters helps stabilize larger banks while smaller, local banks’ knowledge of “unmarked” (flood) hazards may help them navigate disaster risk. Federal disaster aid seems not to act as a bank stabilizer.