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Assessment of the Relationship among Climate Change, Green Finance and Financial Stability: Evidence from Emerging and Developed Markets

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  • Myvel Nabil

Abstract

This study assesses the relationship among climate change, green finance, and financial stability annually from 2013 up to 2021 for 14 countries, focusing on emerging and developed markets. It first considers whether a country’s climate change impact financial stability, investigates whether green finance influences financial stability and how it affects climate change by using carbon dioxide emissions as proxy of climate change. Green finance has been measured by green of asset backed securities, green loans and bonds, while financial stability has been measured by Z-score. Using panel data, the findings indicate that there is a significantly negative effect of CO2 emissions on financial stability, but positive effects of green finance on financial stability in these markets, most notably through green loans. Also, this paper examines the relationship between green finance and climate change by using Kao Residual Cointegration test of countries. In the long run, green finance negatively affects carbon dioxide emissions. Furthermore, the empirical results of the robustness test of GMM are highly consistent with the main test. This study may be extended by conducting Further research to focus on the effect of CO2 emissions on financial markets with the role of financial deepening for countries.

Suggested Citation

  • Myvel Nabil, 2024. "Assessment of the Relationship among Climate Change, Green Finance and Financial Stability: Evidence from Emerging and Developed Markets," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(2), pages 1-51, February.
    • Handle: RePEc:ibn:ijefaa:v:16:y:2024:i:2:p:51
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    References listed on IDEAS

    as
    1. Uddin, Gazi Salah & Yahya, Muhammad & Goswami, Gour Gobinda & Lucey, Brian & Ahmed, Ali, 2022. "Stock market contagion during the COVID-19 pandemic in emerging economies," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 302-309.
    2. Kılıçarslan, Zerrin & Dumrul, Yasemin, 2017. "Foreign Direct Investments and CO2 Emissions Relationship: The Case of Turkey," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 8(4), pages 647-660, October.
    3. Nariman Abuatwan, 2023. "The Impact of Green Finance on the Sustainability Performance of the Banking Sector in Palestine: The Moderating Role of Female Presence," Economies, MDPI, vol. 11(10), pages 1-21, October.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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