The macro-financial effects of Climate Policy Risk: evidence from Switzerland

Brendan Berthold ()
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Brendan Berthold: University of Lausanne, Swiss Institute of Applied Research (CREA)

Swiss Journal of Economics and Statistics, 2024, vol. 160, issue 1, 1-13

Abstract: Abstract This paper quantifies empirically the macroeconomic and financial effects of Climate Policy Risk (CPR) in Switzerland. To do so, I develop a new CPR index using text analysis techniques on a large dataset of Swiss media articles. The identification of CPR shocks is achieved by using narrative restrictions around events which are likely to have coincided with an increase in the probability of adopting tighter climate policies. I find that CPR shocks are associated with a significant decline in real GDP and a decline in firm-level CO2 emissions. Using firm-level equity price data and rolling linear panel regressions, I document that CPR is increasingly reflected in asset prices. I further find that CO2-intensive firms perform significantly worse than their greener counterparts following events which increased transition risk. The results are in line with recent theoretical contributions.

Keywords: Climate policy risk; Transition risk; Event-study; Narrative restrictions; Business cycles; Asset prices (search for similar items in EconPapers)
JEL-codes: G11 G18 Q54 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1186/s41937-024-00122-5

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