I show that rising temperatures can detrimentally affect the sovereign creditworthiness of emerging economies. To this end, I collect long-term monthly temperature data of 54 emerging markets. I calculate a country’s temperature deviation from its historical average, which approximates present-day climate change trends. Running regressions from 1994m1 to 2018m12, I find that higher temperature anomalies lower sovereign bond performances (i.e., increase sovereign risk) significantly for countries that are warmer on average and have lower seasonality. The estimated magnitudes suggest that affected countries likely face significant increases in their sovereign borrowing costs if temperatures continue to rise due to climate change. However, results indicate that stronger institutions can make a country more resilient towards temperature shocks, which holds independent of a country’s climate.

We examine how banks manage carbon transition risk by selling loans given to polluting borrowers to less regulated shadow banks in securitization markets. Exploiting the election of Donald Trump as an exogenous shock that reduces carbon risk, we find that banks’ securitization decisions are sensitive to borrowers’ carbon footprints. Banks are more likely to securitize brown loans when carbon risk is high but swiftly change to keep these loans on their balance sheets when carbon risk is reduced after Trump’s election. Importantly, securitization enables banks to offer lower interest rates to polluting borrowers but does not affect the supply of green loans. Our findings are more pronounced among domestic banks and banks that do not display green lending preferences. We discuss how securitization can weaken the effectiveness of bank climate policies through reducing banks’ incentives to price carbon risk.

Syndicated loan data provided by DealScan is an essential input in banking research. This data is rich enough to answer urging questions on bank lending, e.g., in the presence of financial shocks or climate change. However, many data options raise the question of how to choose the estimation sample. We employ a standard regression framework analyzing bank lending during the financial crisis of 2007/08 to study how conventional but varying usages of DealScan affect the estimates. The key finding is that the direction of coefficients remains relatively robust. However, statistical significance depends on the data and sampling choice and we provide guidelines for applied research.

We identify the effect of climate change-related regulatory risks on credit real-location. Our evidence suggests that effects depend borrower's region. Following an increase in salience of regulatory risks, banks reallocate credit to US firms that could be negatively impacted by regulatory interventions. Conversely, in Europe, banks lend more to firms that could benefit from environmental regulation. The effect is moderated by banks' own loan portfolio composition. Banks with a portfolio tilted towards firms that could be negatively a affected by environmental policies increasingly support these firms. Overall, our results indicate that financial implications of regulation associated with climate change appear to be the main drivers of banks' behavior.

Young people are marching around the globe to ask for measures against climate change and to protect the environment. Using novel survey data, we ask who participates in such powerful movements and what can be learned from our findings. The survey was conducted in German and is based on answers from more than 600 participants. We find that survey respondents are less likely to participate in climate marches like “Fridays for Future” in case they trust more in (large) corporations suggesting a link between trust and climate activism. We also ask whether worries about climate change or attitudes towards more environmentally friendly behavior match their participation frequency in climate marches. Results reveal that respondents being more worried about climate change or the environment tend to participate more often in marches addressing these concerns. Similarly, participation in climate marches correlates positively with acting environmentally sustainable. Hence, our findings might be relevant for corporations in case they want to keep the support of young customers participating in climate marches.

Gegenstand des Begleitforschungsvorhabens ist das Monitoring, die Evaluierung und die wissenschaftliche Begleitung des Strukturwandels in der (brandenburgischen) Lausitz, der sich durch den Ausstieg aus der Braunkohleförderung und -verstromung ergibt. Das Vorhaben verfolgt zwei Anliegen. Erstens widmet sich das Vorhaben den Wirkungen der Fördermaßnahmen des Strukturstärkungsgesetzes, mit denen der Bund und die Länder die ökonomischen und gesellschaftlichen Folgen, die sich für diese Regionen ergeben, bewältigen wollen. Es beschreibt zweitens die aktuelle wirtschaftliche Situation und ihre Entwicklung in den vom Kohleausstieg betroffenen Regionen, da diese nicht nur von strukturpolitischen Maßnahmen, sondern auch von endogenen Entwicklungen, wie etwa der Demografie oder globalen Trends, wie z. B. der Decarbonisierung weiterer Industrien und der Digitalisierung, abhängig ist. Beide Anliegen bedürfen eines umfangreichen Indikatorensystems, das in diesem Vorhaben grundlegend entwickelt werden soll. Hier geht es vor allem darum, bereits vorhandene Daten intelligent zu verknüpfen und nur dort, wo es nicht anders möglich ist, neue Daten effektiv und effizient zu erheben.Das Vorhaben hat vorerst eine Laufzeit von einem Jahr mit der Option der Verlängerung. Es wird durchgeführt von der Brandenburgischen Technischen Universität in Kooperation mit dem Leibniz Institut für Wirtschaftsforschung Halle (IWH).

The dissertation examines various factors influencing the financing costs of countries. The euro crisis, commodity prices, and climate change are identified as three key factors, and their empirical significance is examined statistically. Another article deals with the integration of financial markets and its impact on the spread of economic cycles.

Climate change projections show that the average global temperature will very likely increase further. Policymakers need to implement suitable mitigation policy measures. This thesis uses dynamic general equilibrium models (DGEs) to analyse the potential economic effects of mitigation policy. Chapter 2 documents the forecasting performance of standardly estimated macroeconomic models and compare them to extended versions. It turns out that neither alternative expectation formation behaviour nor financial frictions can systematically increase the forecasting performance of macroeconomic models. Chapter 3 studies potential economic consequences of a coal phase-out in Germany, using a spatial dynamic general equilibrium model. A phase-out until 2035 is not worse in terms of welfare compared to a coal exit until 2040. Chapter 4 develops a dynamic stochastic general equilibrium (DSGE) model with risky capital and oil as production factors. The contribution of financial market frictions and oil market disturbances to the US business cycle are low. An oil tax increase, to reduce crude oil consumption by 10% can cause a contraction of GDP by 1 to 2%.