Abstract
Climate change which caused to dramatic economic impact is a key issue for the world in the 21st century. Using data for Portugal, Ireland, Italy and Spain (PIIGS) countries over the years 1990-2009, this study investigates the causal relationship from climate change to financial risk/stability via Hatemi-J asymmetric causality test that separates positive and negative shocks in analysis. As a result of this study, both positive and negative shocks existed for Ireland, causality from climate change to financial risk emerged for Spain in only negative shocks. In addition, the results showed that a positive shock in climate change cause a negative shock in financial stability. In the cases of Greece and Portugal none of the causal relationships cannot be proved.
Highlights
The physical climate system that is associated with the earth’s atmosphere, land surfaces and oceans, along with the snow and ice is constantly changing
According to the empirical results, the null hypothesis of positive/negative shocks not causing positive/negative financial risk shocks can be strongly rejected for Ireland
The results showed that a positive shock in climate change cause a negative shock in financial stability for Italy
Summary
The physical climate system that is associated with the earth’s atmosphere, land surfaces and oceans, along with the snow and ice is constantly changing. Do changes to each component of the system influence the risk of natural catastrophes, but the interactions between them bring about an inherent uncertainty surrounding how climate will evolve in the future (Dailey et al 2009). Together with this uncertainty, by the rapid development of technology and the increasing significance of energy consumption, the effect of environmental issues on financial institutions has become one of the most popular issues since the 1980s. The fact that climate change risk was on the agenda of the G7 summit, was held in Schloss Elmau in June 2015 can be illustrated as an example to its popularity
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