Climate, geopolitical, and energy market risk interconnectedness: Evidence from a new climate risk index

Qinen Gu, Shaofang Li, Sihua Tian and Yuyouting Wang

Finance Research Letters, 2023, vol. 58, issue PB

Abstract: Using meteorological monitoring data from eight climate disasters across the globe along with financial data from the WTI and BNG energy markets, this study employs the fixed-base extreme difference entropy method to construct a climate risk index (CRI) and investigates the relationship between climate risk, geopolitical risk (GPR), and energy market risk based on the mixed-frequency VAR (MF-VAR) method. The empirical results show that an increase in both GPR and CRI is related to an increase in energy market risk, and that a higher CRI is associated with greater GPR. Moreover, the positive relationship between CRI scores and energy market risk after the Paris Agreement has grown stronger.

Keywords: Climate risk; Geopolitical risk; Energy markets risk; MF-VAR (search for similar items in EconPapers)
JEL-codes: C58 G12 Q41 Q54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s154461232300764x

DOI: 10.1016/j.frl.2023.104392

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