Oil prices volatility and economic performance during COVID-19 and financial crises of 2007-2008

Geopolitical risk and firm-level environmental, social and governance (ESG) performance

This study investigates the impact of geopolitical risk on firm-level environmental, social, and governance (ESG) performance. Using a news-based indicator of geopolitical risk across 41 countries and a comprehensive dataset spanning from 2002 to 2021 with 65,354 firm-year observations, we uncover that geopolitical risk is negatively associated with ESG performance. Our findings remain robust even when considering alternative measures of geopolitical risk, ESG components, and sub-samples. Moreover, we address potential endogeneity concerns through two-stage least squares, propensity score matching and entropy balancing approaches. Interestingly, we find that the effect of geopolitical risk is positive for countries with lower geopolitical risk and high peace, indicating that relatively stable environments can incentivize firms to enhance their sustainability practices. We also examine the potential channel effects of cash holding, corporate investment, and cost of capital, and found significant effects. Overall, this paper underscores the significance of geopolitical risk as a macro-level shock that significantly influences ESG performance.

Navigating the interconnected risks in currency valuation: unveiling the role of climate policy uncertainty

Given the significance of fostering sustainable climate conditions for long-term economic stability and financial resilience, this study probes the connection between climate-related policy ambiguity and its implications for currency valuation. In doing so, the current study investigates the interconnected effects of climate policy on economic policy uncertainty and geopolitical risk with the currency valuation in ASEAN countries. Employing wavelet coherence analysis and partial wavelet coherence analysis, the paper highlights the complex relationships among these factors and their implications for exchange rate fluctuations. Using data from 2000 to 2022, the findings reveal that climate policy uncertainty is an important driver of exchange rate movements, amplifying the impact of economic policy uncertainty and geopolitical risk. Furthermore, the study identifies a vicious cycle between climate policy uncertainty and exchange rates, potentially impacting the region's macroeconomic stability and long-term economic growth. The study presents several policy recommendations to address economic and climate policy uncertainties comprehensively based on the findings. These recommendations include establishing national frameworks for climate risk management, enhancing policy credibility and macroeconomic stability, and promoting regional integration to mitigate the influence of geopolitical risk on exchange rates.

The green wave for climate: overcoming financial intermediation challenges in climate change mitigation through credit subsidies

The aim of this research is to investigate the role of credit subsidies in overcoming financial intermediation challenges. The study seeks to evaluate the current financial intermediation landscape in both countries with respect to climate change mitigation, and to determine the effectiveness of credit subsidies as a policy instrument for promoting mitigation efforts. We apply the unit root test and the error correction modeling technique in examining data from 2012 to 2018 originating from China and Japan, respectively. After that, an explanation for the data is constructed utilizing a regression method. Among the most important findings are the contributions of credit subsidies to eliminating fiscal imbalances, the positive effects they have on global commerce, and the relevance of credit subsidies in reducing greenhouse gas emissions in China and Japan. A 28% and 37% reduction in climate change, respectively, can be achieved by implementing credit subsidy programs for local residents in China and Japan. To provide households with the finance they require to tackle climate change, the financial systems of the industrialized world, particularly those in China and Japan, need to be upgraded.

Crude oil, crypto-assets and dependence: the impact of the COVID-19 pandemic

Purpose

This paper aims to empirically investigate the extent to which interdependence in markets may be driven by COVID-19 effects.

Design/methodology/approach

The current global COVID-19 pandemic is adversely affecting the oil market (West Texas Intermediate) and crypto-assets markets.

Findings

The authors find that the dependence structure changes significantly after the global pandemic, providing valuable information on how the COVID-19 crisis affects interdependencies. The results also prove that the performance of digital gold seems to be better compared to stablecoin.

Originality/value

The authors fit copulas to pairs of before and after returns, analyze the observed changes in the dependence structure and discuss asymmetries on propagation of crisis. The authors also use the findings to construct portfolios possessing desirable expected behavior.