Beschreibung:
This paper investigates the effect of climate risk on systemic financial risks by employing the network approach. Our results demonstrate that climate risk not only affects a single financial market, but also induces risk co-movement, which aggravates potential systemic financial risks. More specifically, we find that while the forex and commodity markets appear to be usually more sensitive to climate-related information, the bond and stock markets play a crucial role in transmitting climate risk. In addition, the vulnerability of financial asset price fluctuations to climate risk changes substantially over time. Quantile regressions reveal the positive impact of climate risk on total connectedness across the financial system. Our study provides novel insight into how the financial system responds to climate-related information and how systemic risk dynamics materialize