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Climate Risk and Commodity Currencies

Felix Kapfhammer (), Vegard Larsen and Leif Thorsrud

No No 10/2020, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: The positive relationship between real exchange rates and natural resource income is well understood and studied. However, climate change and the transition to a lower-carbon economy now challenges this relationship. We document this by proposing a novel news media-based measure of climate change transition risk and show that when such risk is high, major commodity currencies experience a persistent depreciation and the relationship between commodity price fluctuations and currencies tends to become weaker.

Keywords: Exchange Rates; Climate; Risk; Commodities (search for similar items in EconPapers)
Pages: 49 pages
Date: 2020-12
New Economics Papers: this item is included in nep-env and nep-opm
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https://hdl.handle.net/11250/2711929

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Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0093

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