 Asset association and dynamic risk contagion under climate policy uncertaintyXiaoyuan Zhang, Hang You, Ze Zhang and Wangchun Wu The Quarterly Review of Economics and Finance, 2025, vol. 102, issue C Abstract: In the context of climate policy uncertainty, we introduce a novel discrete-time nonlinear dynamic risk contagion model. This model captures the dynamics of credit risk as it propagates among firms via a multi-path contagion mechanism, spreading risks along diverse pathways between interconnected nodes. Utilizing the Single-Index Model, the LASSO techniques, and the CoVaR method, we map out the industrial chain network and develop systemic risk indicators for firms within this network. Using these indicators, we empirically analyze the impact of climate policy uncertainty on systemic risk. Our theoretical findings underscore the presence of a steady state in networks under climate policy uncertainty. We derive the analytical expressions for the steady state in complete networks. Empirical evidence reveals that climate policy uncertainty significantly amplifies systemic risk in the industrial chain, with upstream firms contributing more to systemic risk and downstream firms experiencing greater risk exposure. Keywords: Risk contagion; Network structures; Dynamic models; Climate policy uncertainty (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:102:y:2025:i:c:s1062976925000353 DOI: 10.1016/j.qref.2025.101994 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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