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Climate change is an existential threat to the world economy like no other, with complex, evolving and nonlinear dynamics that remain a source of great uncertainty. There is a bourgeoning literature on the economic impact of climate change, but research on how climate change affects sovereign risks is limited. Building on our previous research focusing on the impact of climate change on sovereign risks, this paper empirically investigates how climate change may affect sovereign credit ratings. By means of binary-choice models, we find that climate change vulnerability has adverse effects on sovereign credit ratings, after controlling for conventional macroeconomic determinants of credit worthiness. On the other hand, with regards to climate change resilience, we find that countries with greater climate change resilience benefit from higher (better) credit ratings. These findings, robust to a battery of sensitivity checks, also show that impact of climate change is disproportionately greater in developing countries due largely to weaker capacity to adapt to and mitigate the consequences of climate change.

Business and Economics --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- Environmental Economics --- 'Panel Data Models --- Spatio-temporal Models' --- Discrete Regression and Qualitative Choice Models --- Discrete Regressors --- Proportions --- Investment Banking --- Venture Capital --- Brokerage --- Ratings and Ratings Agencies --- Climate --- Natural Disasters and Their Management --- Global Warming --- Environment and Development --- Environment and Trade --- Sustainability --- Environmental Accounts and Accounting --- Environmental Equity --- Population Growth --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary Policy --- General Financial Markets: General (includes Measurement and Data) --- Climate change --- Monetary economics --- Banking --- Finance --- Credit ratings --- International reserves --- Credit --- Emerging and frontier financial markets --- Climatic changes --- Foreign exchange reserves --- Financial services industry --- Australia

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Policymakers across the world are striving to tackle the century-defining challenge of climate change without undermining potential growth. This paper examines the impact of structural reforms in the energy sector (electricity and gas) on enviromental outcomes and green growth indicators in a panel of 25 advanced economies during the period 1970-2020. We obtain striking results. First, while structural reforms so far failed in reducing greenhouse gas emissions per capita, there is some evidence for greater effectiveness in lowering emissions per unit of GDP. Second, although energy reforms are not associated with higher supply of renewable energy as a share of total energy supply, they appear to stimulate a sustained increase in environmental inventions and patents per capita over the medium term. We also find strong evidence of nonlinear effects, with market-friendly energy reforms leading to better environmental outcomes and green growth in countries with stronger environmental regulations. Looking forward, therefore, structural reforms should be designed not just for market efficiency but also for green growth.

Macroeconomics --- Economics: General --- Environmental Conservation and Protection --- Environmental Economics --- Environmental Policy --- Distribution: General --- Personal Income, Wealth, and Their Distributions --- Legal Monopolies and Regulation or Deregulation --- Economics of Regulation --- Institutions and the Macroeconomy --- Environment and Growth --- Climate --- Natural Disasters and Their Management --- Global Warming --- Environmental Economics: General --- Environmental Economics: Government Policy --- Economic & financial crises & disasters --- Economics of specific sectors --- Economic growth --- Climate change --- Environmental economics --- Environmental policy & protocols --- Structural reforms --- Macrostructural analysis --- Sustainable growth --- Greenhouse gas emissions --- Environment --- Environmental policy --- Currency crises --- Informal sector --- Economics --- Economic development --- Greenhouse gases --- Environmental sciences

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Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting potential economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper therefore investigates the impact of climate change vulnerability and resilience on sovereign bond yields and spreads in 98 advanced and developing 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 risks associated with 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.

Banks and Banking --- Investments: Bonds --- Public Finance --- Environmental Economics --- 'Panel Data Models --- Spatio-temporal Models' --- Survey Methods --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Interest Rates: Determination, Term Structure, and Effects --- Open Economy Macroeconomics --- International Financial Markets --- National Budget, Deficit, and Debt: General --- Climate --- Natural Disasters and Their Management --- Global Warming --- General Financial Markets: General (includes Measurement and Data) --- Debt --- Debt Management --- Sovereign Debt --- Climate change --- Investment & securities --- Finance --- Public finance & taxation --- Yield curve --- Sovereign bonds --- Bond yields --- Public debt --- Environment --- Financial services --- Financial institutions --- Climatic changes --- Bonds --- Interest rates --- Debts, Public --- United States

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Debt levels, both private and public, were already at record highs before the Covid-19 pandemic, and surged further in 2020. The high indebteness raises concerns whether it will undermine future growth prospects. This paper contributes to the ongoing debate by examining what happens to economic growth after debt surges. We apply a local projection method to a new dataset of debt surges in 190 countries between 1970 and 2020. Our results show that the relationship between debt surges and economic growth are complex. Debt surges tend to be followed by weaker economic growth and persistently lower output. However, this negative relationship does not always hold. Surges in public debt tend to have the most negative impact on future growth prospects. This is particularly the case if the economy is already operating with a large positive output gap. Debt surges also tend to be followed by weaker economic growth if the initial debt levels are high, especially for private debt surges. Our results also show how debt surges impact future growth. Public debt surges are associated with especially weaker private and public investment, although both private and public consumption are also negatively affected. Surges in corporate debt are followed by lower private and public investment.

Macroeconomics --- Economics: General --- Public Finance --- Production and Operations Management --- Multiple or Simultaneous Equation Models: Models with Panel Data --- Debt --- Debt Management --- Sovereign Debt --- Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data) --- International Business Cycles --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Macroeconomics: Production --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Macroeconomics: Consumption --- Saving --- Wealth --- Economic & financial crises & disasters --- Economics of specific sectors --- Public finance & taxation --- Public debt --- Private debt --- National accounts --- Output gap --- Production --- Potential output --- Public investment spending --- Expenditure --- Currency crises --- Informal sector --- Economics --- Debts, Public --- Economic theory --- Public investments --- Consumption

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• Reference Manager
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Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting potential economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper therefore investigates the impact of climate change vulnerability and resilience on sovereign bond yields and spreads in 98 advanced and developing 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 risks associated with 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.

United States --- Banks and Banking --- Investments: Bonds --- Public Finance --- Environmental Economics --- 'Panel Data Models --- Spatio-temporal Models' --- Survey Methods --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Interest Rates: Determination, Term Structure, and Effects --- Open Economy Macroeconomics --- International Financial Markets --- National Budget, Deficit, and Debt: General --- Climate --- Natural Disasters and Their Management --- Global Warming --- General Financial Markets: General (includes Measurement and Data) --- Debt --- Debt Management --- Sovereign Debt --- Climate change --- Investment & securities --- Finance --- Public finance & taxation --- Yield curve --- Sovereign bonds --- Bond yields --- Public debt --- Environment --- Financial services --- Financial institutions --- Climatic changes --- Bonds --- Interest rates --- Debts, Public --- Panel Data Models --- Spatio-temporal Models