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Climate Risk and Commodity Currencies

Felix Kapfhammer, Vegard Larsen and Leif Thorsrud

No 8788, CESifo Working Paper Series from CESifo

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)
JEL-codes: C11 C53 D83 D84 E13 E31 E37 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-env, nep-mac and nep-opm
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