Natural Capital and Sovereign Bonds

Dieter Wang

No 9606, Policy Research Working Paper Series from The World Bank

Abstract: Natural capital is related to government bonds through the macroeconomy and credit risks. This paper estimates this relationship from the long-term, between-country view and the short-term, within-country view. The paper cautions against the former, as it is dominated by income differences. These are de facto ingrained, as they cannot be overcome by short-term policy efforts. The within-country view is unaffected by the ingrained income bias and leaves room for recent natural capital changes to affect bond yields. The paper finds that non-renewables (fossil fuels and mineral assets) raise bond yields, possibly due to the resource curse. Renewables (forests and agricultural wealth) lower borrowing costs because they are economically worthwhile investments. Protected areas are more likely to be luxury investments.

Keywords: Food Security; Coastal and Marine Resources; Energy and Natural Resources; Forestry; Forests and Forestry; Financial Sector Policy (search for similar items in EconPapers)
Date: 2021-04-01
New Economics Papers: this item is included in nep-env and nep-fdg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:9606

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