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Climate-induced liquidity crises : interbank exposures and macroprudential implications

  • Although climate-induced liquidity risks can cause significant disruptions and instabilities in the financial sector, they are frequently overlooked in current debates and policy discussions. This paper proposes a macro-financial agent-based integrated assessment model to investigate the transmission channels of climate risks to financial instability and study the emergence of liquidity crises through interbank market dynamics. Our simulations show that the financial system could experience serious funding and market liquidity shortages due to climate-induced liquidity crises. Our investigation contributes to our understanding of the impact - and possible solutions - to climate-induced liquidity crises, besides the issue of asset stranding related to transition risks usually considered in the existing studies.

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Metadaten
Document Type:Working Paper
Language:English
Author:Paola D’Orazio, Jessica Reale, Anh Duy Pham
Parent Title (English):Chemnitz economic papers
Issue:No. 059
Number of pages:29
Publisher:Chemnitz University of Technology, Faculty of Economics and Business Administration
Place of publication:Chemnitz, Germany
Date of first publication:2023/06/01
Keyword:Agent-Based Modeling; Climate Risks; Interbank Market; Liquidity Crises; Prudential Regulation
Departments, institutes and facilities:Fachbereich Informatik
Dewey Decimal Classification (DDC):0 Informatik, Informationswissenschaft, allgemeine Werke / 00 Informatik, Wissen, Systeme / 005 Computerprogrammierung, Programme, Daten
Entry in this database:2023/07/25