{"title":"Global climate policy uncertainty and financial markets","authors":"","doi":"10.1016/j.intfin.2024.102047","DOIUrl":null,"url":null,"abstract":"<div><p>This paper aims to examine whether and to what extent global climate policy uncertainty can impact financial markets. We first construct a novel index of global climate policy uncertainty by performing textual analysis of two million news articles over the period 2013–2021. We then use a time–frequency spillover and network analysis to show how the impacts of shocks from global climate policy uncertainty on five key international financial markets evolve over time and to characterize the underlying risk transmission channels. We find significant spillovers from global climate policy uncertainty to the financial markets, while the impacts of global climate policy uncertainty are heterogenous across financial markets and more profound in the bond market. Our results also show that spillovers from global climate policy uncertainty to the financial markets are mostly concentrated in the short term, underscoring the need for investors to adjust strategies and regulators to implement measures mitigating short-term market reactions to climate policy shocks.</p></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":null,"pages":null},"PeriodicalIF":5.4000,"publicationDate":"2024-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Financial Markets Institutions & Money","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042443124001136","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper aims to examine whether and to what extent global climate policy uncertainty can impact financial markets. We first construct a novel index of global climate policy uncertainty by performing textual analysis of two million news articles over the period 2013–2021. We then use a time–frequency spillover and network analysis to show how the impacts of shocks from global climate policy uncertainty on five key international financial markets evolve over time and to characterize the underlying risk transmission channels. We find significant spillovers from global climate policy uncertainty to the financial markets, while the impacts of global climate policy uncertainty are heterogenous across financial markets and more profound in the bond market. Our results also show that spillovers from global climate policy uncertainty to the financial markets are mostly concentrated in the short term, underscoring the need for investors to adjust strategies and regulators to implement measures mitigating short-term market reactions to climate policy shocks.
期刊介绍:
International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.