Greater climate vulnerability appears to have a sizable positive effect on sovereign bond yields, while greater resilience to climate change has an offsetting effect.
Vulnerability to the direct effects of climate change matter more than climate risk resilience in the implications for sovereign borrowing costs.
While the ultimate resolution of COVID-19 may lead to a market correction as uncertainty declines, there may be some permanent effects on financial markets and capital flows.
Current account surplus shocks emanating from the People's Republic of China, Japan, and Germany have strong positive effects on regional growth.
Equity market cycles in emerging market economies in Asia, Latin America, and Eastern Europe may be a more useful gauge of the financial cycle compared to cycles in credit and property markets.
Policy makers need to be aware of the increasing prominence of the digital economy and digital finance and seek to better understand how continued digitalization will affect policies aimed at managing the economy.
Governments must climate-proof their economies and public finances or potentially face an ever-worsening spiral of climate vulnerability and unsustainable debt burdens.