This prestigious competition is organised annually by the European Central Bank.

This year's competition theme is ‘Monetary policy in an era of transformation’. Van der Straten’s paper Flooded House or Underwater Mortgage (scroll down to view full paper) looks at the implications of climate change and adaptation on housing, income and wealth. Her analysis shows that climate change has a redistributive impact since it has an effect on the costs of borrowing as well as house prices. Her paper goes on to explain how houses exposed to climate risk face a price discount in the market.

Wealth inequality

At the same time, climate change risk increases house prices as habitats are reduced. 1 of the important findings in her paper involves the response of households to rising physical damages as they react to climate change. Households with more financial constraints have fewer incentives to adapt to climate change. Their failure to reduce their vulnerability increases wealth inequality. They are more exposed to damage resulting from climate change and stand to lose even more wealth when an extreme weather event occurs.

Choosing the winner

The finalists will present the main finding of their work in a Forum taking place from 1 to 3 July. During the Forum, they will engage in discussions with policy-makers, scholars and market economists from around the world. The finalists’ papers will then be assessed by a jury of top academics and senior ECB staff members, taking into account votes cast by Forum participants. The jury will rate the finalists’ papers and choose the winner based on:

• innovative thinking and scientific merit of the work;
• relevance for ECB/Eurozone policies;

The winner will be announced at the end of the Forum and also receive a cash prize of €10,000.