NEW PUBLICATION: Using data from around 100 countries between 1995 and 2019, we examine the impact of climate vulnerability on fiscal risk. We also explore the transmission channels that are important for the relationship between climate vulnerability and fiscal risk. Our results show that in highly climate-vulnerable economies, increased vulnerability leads to higher government bond yields by 0.5 to 1.5 percentage point and lower sovereign debt ratings by up to one notch over two years. These effects are exacerbated by religious tensions as a form of political instability but mitigated by well-developed financial markets. Therefore, even though fiscal consolidation is crucial for containing fiscal risks in the case of climate vulnerability, political stability and financial development also matter.
You can find the preprint version, the abstract, the keywords, and the online appendix in an older post:
You can quote this article as:
Saadaoui, J., Beirne, J., Park, D., & Uddin, G. S. (2026). Impact of Climate Vulnerability on Fiscal Risk: Do Religious Tensions and Financial Development Matter? Energy Economics, forthcoming. Open Access thanks to a grant from the Université Paris VIII Vincennes-Saint-Denis.
