Climate-related risks could build up in hidden ways that could result in cascading losses. Using Established Economic Foundations for Transition Risks The costs and timing of the transition to a low-carbon economy will depend on hard-to-predict policy, technology, and behavioral changes.
In practice, however, during upswings incentives towards elusion are likely to be stronger. These two offsetting effects make it hard to establish whether MAP instruments are more effective during upturns than downturns. Also, for an effective release of some macroprudential tools in bad times, there must have been a substantial tightening in good times.