Does extreme climate exacerbate the risk spillover in green finance markets? evidence from a multi-horizon investment perspective

Qichang Xie, Ruize Gong, Lei Yin and Xin Xu

Journal of International Money and Finance, 2025, vol. 151, issue C

Abstract: Green finance is playing an increasingly important role in building an innovative financial system. However, faced with the growing frequency of extreme weather and external shocks, the stable operation of the green finance market is under pressure and challenge. Given the high-dimensional nature and the variation of financial risk contagion across different time scales, this paper introduces the HD-TVPVAR-BK (high-dimensional time-varying frequency domain) spillover index model to analyze the risk spillover among major financial institutions within China’s green finance market under different investment horizons. Moreover, a GARCH-MIDAS-EC mixed-frequency model is constructed to explore the multi-horizon driving impact of extreme climate on the risk spillover of the green finance market. The results show that short-term risk spillovers are the main contributors to risk contagion among financial institutions in the green finance market, far exceeding the risk spillover in the long term, and the risk spillover in the short-term is more significant in the face of external shocks, indicating a stronger immediate market response to exogenous events. Extreme weather is an important catalyst exacerbating risk spillover in the green finance market, with a more prominent impact on short-term investment horizons. Different extreme climate conditions have varying impacts on risk spillovers in the green finance market, with the long-term effects of extreme precipitation being more profound compared to extreme low temperatures and high temperatures. The results of this paper reveal for the first time the impact of different climatic conditions on cross-term risk contagion in the green finance market, providing new evidence for the effective prevention of extreme weather shocks to the financial market.

Keywords: Extreme climate; Green finance market; High-dimensional frequency domain spillover; Mixed-frequency methods; Risk spillover (search for similar items in EconPapers)
JEL-codes: E44 G11 G14 G15 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560624002493
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:151:y:2025:i:c:s0261560624002493

DOI: 10.1016/j.jimonfin.2024.103262

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().