Related papers: Sovereign Debt Default and Climate Risk
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We develop a financial market model in which a large population of firms chooses dynamic emission strategies under climate transition risk, interacting with both environmentally concerned and neutral investors. Firms face a trade-off…
A one-size-fits-all paradigm that only adapts the scale and immediate outcome of climate investment to economic circumstances will provide a short-lived, economically inadequate response to climate issues; given the limited resources…
The aim of this work is to propose an end-by-end modeling framework to evaluate the risk measures of a bank's portfolio of collateralized loans in an economy subject to the climate transition. The economy, organized in sectors, is driven by…
Climate change poses new risks for real estate assets. Given that the majority of home buyers use a loan to pay for their homes and the majority of these loans are purchased by the Government Sponsored Enterprises (GSEs), it is important to…
There is great uncertainty about future climate conditions and the appropriate policies for managing interactions between the climate and the economy. We develop a multidimensional computational model to examine how uncertainties and risks…
Using Croatian data and the IMF's Natural Disaster Debt Dynamic Tool, this paper assesses how public debt adjusts to extreme events in a small open economy. We compare debt paths under baseline and stress scenarios, the latter simulating a…
The agricultural sector is particularly susceptible to the impact of climate change. In this paper, I investigate how vulnerability to climate change affects U.S. farms' credit access, and demonstrates that such impact is unequally…
Conventionally, a habitable planet is one that can support liquid water on its surface. Habitability depends on temperature, which is set by insolation and the greenhouse effect, due mainly to CO2 and water vapor. The CO2 level is increased…
I study the dynamic, general equilibrium implications of climate-change-linked transition risk on macroeconomic outcomes and asset prices. Climate-change-linked expectations of fossil fuel restrictions can produce a ``run on fossil fuels''…
This paper builds a finite-horizon model to study the role of physical collateral in a model of strategic defaults, when the borrower can develop reputation for honesty. Asset ownership increases attractiveness of the reputational channel:…
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…
Understanding the role of human behavior in shaping environmental outcomes is crucial for addressing global challenges such as climate change. Environmental systems are influenced not only by natural factors like temperature, but also by…
Anthropogenic emissions of CO2 must soon approach net-zero to stabilize the global mean temperature. Although several international agreements have advocated for coordinated climate actions, their implementation has remained below…
A successful response to climate change needs vast investments in low-carbon research, energy, and sustainable development. Governments can drive research, provide environmental regulation, and accelerate global development, but the…
Estimating the effects of climate on economic output is crucial for formulating climate policy, but current empirical findings remain ambiguous. Using annual panel model and panel long-difference model with global subnational data from…
Abstract: The rising global temperatures caused by climate change significantly impact energy consumption and electricity generation. Fluctuating temperatures and frequent extreme weather events disrupt energy production and consumption…
This paper investigates how the cost of public debt shapes fiscal policy and its effect on the economy. Using U.S. historical data, I show that when servicing the debt creates a fiscal burden, the government responds to spending shocks by…
The carbon-reducing effect of attention is scarcer than that of material resources, and when the government focuses its attention on the environment, resources will be allocated in a direction that is conducive to reducing carbon. Using…
Carbon emissions significantly contribute to climate change, and carbon credits have emerged as a key tool for mitigating environmental damage and helping organizations manage their carbon footprint. Despite their growing importance across…