This changes everything : climate Shocks and sovereign bonds

Cevik, Serhan; Jalles, João Tovar

http://hdl.handle.net/10400.5/20115

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Authors

Cevik, Serhan

Jalles, João Tovar

Abstract(s)

Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper investigates the impact of climate change vulnerability and resilience on sovereign bond yields and spreads in 98 countries over the period 1995–2017. We find that the vulnerability and resilience to climate change have a significant impact on the cost government borrowing, after controlling for conventional determinants of sovereign risk. That is, countries that are more resilient to climate change have lower bond yields and spreads relative to countries with greater vulnerability to climate change. Furthermore, partitioning the sample into country groups reveals that the magnitude and statistical significance of these effects are much greater in developing countries with weaker capacity to adapt to and mitigate the consequences of climate change.

Keywords

climate change vulnerability resilience government bond yields and spreads

URI

http://hdl.handle.net/10400.5/20115

Citation

Cevik, Serhan e João Tovar Jalles (2020). "This changes everything : climate Shocks and sovereign bonds". Instituto Superior de Economia e Gestão – REM Working paper nº 0132 – 2020