New Climate Change Findings from Federal Reserve Bank Outlined (Climate Defaults and Financial Adaptation): Climate Change

2024 OCT 01 (NewsRx) -- By a News Reporter-Staff News Editor at Climate Change Daily News -- Investigators publish new report on Climate Change. According to news originating from Richmond, Virginia, by NewsRx correspondents, research stated, “We analyze the relationship between climate-related disasters and sovereign debt crises using a model with capital accumulation, sovereign default, and disaster risk. We find that disaster risk and default risk together lead to slow post-disaster recovery and heightened borrowing costs.”

Our news journalists obtained a quote from the research from Federal Reserve Bank, “Calibrating the model to Mexico, we find that the increase in cyclone risk due to climate change leads to a welfare loss equivalent to a permanent 0.95% consumption drop. However, financial adaptation via catastrophe bonds and disaster insurance can reduce these losses by about 21%.”

According to the news editors, the research concluded: “Our study highlights the importance of financial frictions in analyzing climate change impacts.”

This research has been peer-reviewed.

For more information on this research see: Climate Defaults and Financial Adaptation. European Economic Review, 2024;170. European Economic Review can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; European Economic Review - http://www.journals.elsevier.com/european-economic-review/)

The news correspondents report that additional information may be obtained from Toan Phan, Federal Reserve Bank, Richmond, VA 23219, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.euroecorev.2024.104866. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.