Facundo Luna

Climate policy uncertainty (CPU) poses growing risks to macroeconomic stability, yet its transmission mechanisms remain understood. While the literature has examined general uncertainty, the state-dependent effects of transition risk through the financial system are underexplored. Using U.S. local projections and a two-sector New Keynesian model, this paper examines how CPU shocks propagate across the business cycle. I find that CPU shocks significantly contract investment and credit during economic expansions, whereas their effects are statistically muted during recessions. These dynamics are driven by a brown collateral channel, where uncertainty about the future value of carbon-intensive assets triggers a financial accelerator mechanism. The findings highlight that transition risk operates as a systemic financial shock, suggesting that macro-prudential frameworks must account for the volatility of brown asset valuations.

Climate change should deteriorate the value of real estate, but studies are lacking for developing economies which may suffer the worst weather changes. We match an administrative register of all the real estate properties' transactions in Chile between 2002 and 2020 with a high spatial resolution dataset of local temperatures and precipitation. Even after controlling for a wide set of home characteristics or fixed-effects for each property, we find that fluctuations in temperatures had an impact on the prices of residential homes and agricultural properties.

How does the short-term financial architecture of production networks shape the propagation of climate shocks? Using the universe of electronic invoices and wildfire alerts in Chile (2015--2024), I reconstruct monthly buyer--supplier links for the formal economy and estimate how pre-existing trade credit positions determine whether firms absorb or transmit wildfire-induced disruptions. A Local Projections DiD design identifies horizon-specific effects across three exposure margins: direct, upstream, and downstream. Trade credit received operates as state-contingent liquidity insurance: it broadly buffers downstream shocks by bridging payment delays, selectively mitigates upstream shocks by financing emergency procurement, and offers narrow protection against direct physical destruction. Trade credit supplied amplifies vulnerability by locking working capital in receivables that become illiquid when customers are in distress. A size gradient —buffering for small firms, absent for large firms — confirms that the mechanism operates through binding financial constraints. Aggregating across exposure margins, indirect network losses exceed direct losses. A counterfactual in which all indirectly exposed firms hold slack payables positions reduces aggregate losses by nearly two-thirds, implying that the distribution of interfirm financial positions is a determinant of aggregate climate resilience.

Climate policy uncertainty (CPU) has surged to record levels, yet its transmission through financial markets remains largely unexplored. Using the narrative identification strategy of Gavriilidis et al. (2026), I document three key findings on the credit market transmission of CPU shocks. First, CPU shocks significantly tighten credit markets: excess bond premiums rise, and bank loans contract by 1--2\%, driven initially by stricter bank lending standards. Second, these effects are strongly state-dependent, with investment declines and credit spread widenings severely amplified when aggregate financial conditions are already tight. Third, firm-level data reveals that climate-exposed and highly leveraged firms face the steepest rises in borrowing costs; however, less-leveraged firms cut investment more sharply, reflecting greater financial flexibility to adjust (Ottonello and Winberry, 2020). These findings highlight a novel financial amplification channel with direct implications for climate stress-testing and transition policy design.

This paper studies the role of monetary policy during the low-carbon transition in an economy with carbon taxation, financial frictions, and endogenous abatement. I develop a two-sector DSGE model with green and brown capital, banking constraints, and Epstein-Zin preferences to examine how transition risks propagate through asset prices and balance sheets. Carbon taxes operate as supply-side shocks that generate asset stranding and weaken bank net worth, amplifying real effects through the financial accelerator. I evaluate standard and emissions-augmented Taylor rules under welfare maximization and stabilization objectives. While aggressive accommodation of declining emissions can improve welfare by smoothing consumption risk and supporting investment, it does so at the cost of substantial inflation volatility, rendering such policies incompatible with conventional central bank mandates -- a structural tension between household welfare and price stability objectives. In contrast, a small emissions response improves stabilization outcomes without materially affecting the emissions path, which remains determined by fiscal policy. The results support a pragmatic role for monetary policy that smooths financial adjustment during the transition while preserving price stability.

This paper shows that the accuracy and behavior of U.S. inflation expectations depend critically on whether inflation is driven by demand or supply shocks. Combining one-year-ahead expectations from the SPF, Michigan Survey, and Cleveland Fed with Shapiro's (2024) decomposition, we find a reversal in forecast rankings: consumers forecast CPI inflation more accurately than experts in demand-driven episodes, while professional and market-based expectations dominate in supply-driven episodes. Forecast inefficiencies and error persistence are also regime-specific. A simple New Keynesian with noisy-information framework with divine coincidence in demand regimes and its breakdown in supply regimes rationalizes these patterns and their policy implications. A state-dependent Taylor rule which conditions on the prevailing demand–supply mix can reduce welfare losses by around 20 percent, highlighting the monetary policy gains from treating expectations as regime-contingent rather than uniform.

This paper studies how large wildfires in Chile affect credit risk and bank behavior. Wildfires increase firm-level delinquency, with stronger effects for small enterprises and for firms in agriculture and forestry. Banks reprice climate risk by raising interest rates in high wildfire-risk areas, even absent direct exposure. Exposed banks, especially those with weaker capital buffers, contract lending and raise interest rates elsewhere. At the aggregate level, however, these effects do not translate into economically meaningful changes in local credit aggregates or for the banking sector.