What is the relationship between biodiversity and the frequency of financial crises? Global evidence

Mikhail Stolbov, Maria Shchepeleva and Daniil Parfenov

Economics Letters, 2025, vol. 250, issue C

Abstract: The paper studies the relationship between the state of world's biodiversity proxied by the Living Planet Index and the frequency of financial crises, conditional on global economic growth and the total number of biodiversity-related environmental policy instruments, during 1970–2018. We find that the increased frequency of banking crises as well as triple crises, i.e. simultaneously occurring banking, sovereign debt and currency crises, has a detrimental effect on biodiversity. Moreover, this relationship appears bi-directional. Thus, our findings call for a joint implementation of environmental and macroprudential policies to better align the goals of biodiversity conservation and financial stability worldwide.

Keywords: Biodiversity; Financial crisis; Living planet index; Local projections (search for similar items in EconPapers)
JEL-codes: C32 E44 G01 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:250:y:2025:i:c:s0165176525000965

DOI: 10.1016/j.econlet.2025.112259

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