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Climate-Related Financial Stability Risks for the United States: Methods and Applications

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Abstract

The authors review ten broad classes of models that have been used to study potential financial stability risks arising from climate change in the United States. Their lens is primarily methodological: They describe each modeling technique, its advantages and disadvantages, and its key results. They find that statistical methods, based on reduced-form econometrics, are the most used tool, followed by general equilibrium models. While no approach in isolation addresses the complexity of climate-related financial stability risks, they discuss how existing techniques can be combined to inform policymakers and the private sector about climate-related financial stability risks for the United States.

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  • Celso Brunetti & Matteo Crosignani & Benjamin Dennis & Gurubala Kotta & Donald P. Morgan & Chaehee Shin & Ilknur Zer, 2024. "Climate-Related Financial Stability Risks for the United States: Methods and Applications," Economic Policy Review, Federal Reserve Bank of New York, vol. 30(1), pages 1-37, October.
    • Handle: RePEc:fip:fednep:98931
    DOI: 10.59576/epr.30.1.1-37
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    Cited by:

    1. Justin Contat & Carrie Hopkins & Luis Mejia & Matthew Suandi, 2024. "When climate meets real estate: A survey of the literature," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(3), pages 618-659, May.
    2. Charles M. Kahn & Ahyan Panjwani & João A. C. Santos, 2024. "Insurance, Weather, and Financial Stability," Staff Reports 1107, Federal Reserve Bank of New York.
    3. Dong, Xiyong & Yoon, Seong-Min, 2023. "Effect of weather and environmental attentions on financial system risks: Evidence from Chinese high- and low-carbon assets," Energy Economics, Elsevier, vol. 121(C).

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    More about this item

    Keywords

    climate; climate risk; climate change; financial stability; financial risk;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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