Abstract
PurposeClimate change not only causes serious economic losses but also influences financial stability. The related research is still at the initial stage. This paper aims to examine and explore the impact of climate change on financial stability in China.Design/methodology/approachThis paper first uses vector autoregression model to study the impact of climate change to financial stability and applies NARDL model to assess the nonlinear asymmetric effect of climate change on China’s financial stability using monthly data from 2002 to 2018.FindingsThe results show that both positive and negative climate shocks do harm to financial stability. In the short term, the effect of positive climate shocks on financial stability is greater than the negative climate shocks in the current period, but less in the lag period. In the long term, negative climate shocks bring larger adjustments to financial stability relative to positive climate shocks. Moreover, compared with the short-term effect, climate change is more destructive to financial stability in the long run.Originality/valueThe paper provides a quantitative reference for assessing the nexus between climate change and financial stability from a nonlinear and asymmetric perspective, which is beneficial for understanding climate-related financial risks.
Highlights
Climate change is a common concern of the international community and one of the most serious challenges facing mankind (Chou et al, 2016; Gaffney and Steffen, 2017; Wei et al, 2014)
Climate change mainly affects the financial system through physical risks and transition risks
The results show that both positive and negative climate shocks do harm to financial stability
Summary
Climate change is a common concern of the international community and one of the most serious challenges facing mankind (Chou et al, 2016; Gaffney and Steffen, 2017; Wei et al, 2014). Health and other fields and causes the invisible crisis in some places (Akbari et al, 2020; Shakhawat Hossain et al, 2020; Zhang et al, 2020; Si et al, 2021). The most striking feature of climate change is uncertainty The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
