Temperature shocks and bank systemic risk: Evidence from China

Song, Xiaoni; Tong, Fang

doi:10.1016/j.frl.2022.103447

Cited by 9 publications

(2 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The second contribution of this paper is to extend the understanding of temperature difference and to emphasize the asymmetric effects of two-way fluctuations in temperature difference. Although previous scholars have defined temperature change as the average day-to-day temperature [44], and the method of using day-by-day observations of meteorological stations during the baseline period and percentile relative thresholds to define the extreme thresholds of meteorological indicators in different cities [45], the observational methods of these are at an independent level, and there is no comparison of the temperature with the historical temperature Considering the long-term changes in temperature, this paper draws on the method used by Song & Fang [46] to calculate the temperature difference from the moving average of the quarterly temperature deviation from the base period, measures the temperature difference based on the degree and direction of deviation of the actual temperature relative to the average temperature of the same period in the past, and decomposes the temperature difference into the increase and decrease of temperature, to explore the effect of the bi-directional fluctuation of the temperature difference on the asymmetry of the China's pan financial market with asymmetric effects.…”

Section: Review Of the Literature Reviewmentioning

confidence: 99%

Temperature difference and systemic risk: Evidence from LASSO-VAR-DY based on China’s pan-financial market

Jia,

2024

PLoS ONE

View full text Add to dashboard Cite

Climate change-induced pan-financial market and the contagion of systemic financial risks are becoming important issues in the financial sector. The paper measures the temperature difference in terms of the degree and direction of deviation of the actual temperature relative to the average temperature of the same historical period. Based on the high-dimensional time-series variable LASSO-VAR-DY framework, we construct a pan-financial market volatility correlation network consisting of 112 Chinese listed companies in banking, insurance, securities, real estate, traditional energy, and new energy, use eigenvector centrality to measure the systematic risk of each firm, and then empirically test the effect of temperature difference on systematic risk under pan-financial market scenario. The results of the study show that (ⅰ) There is a significant difference among the systemic risk of financial sectors such as banking, insurance, and securities in the financial market pan-financial market scenario and the systemic risk when the financial market pan-financial market is not taken into account;(ⅱ) Higher temperature significantly exacerbates systemic financial risk, while colder temperature significantly mitigates systemic risk, but both have an asymmetric effect on systemic risk, and there is sectoral heterogeneity.(ⅲ) From the dynamic evolutionary characteristics, there are significant differences in the response of systemic financial risk to positive and negative temperature shocks;(iv) The results of the systemic risk variance decomposition indicate that the temperature change contributes more to the variance of systemic risk in the banking and securities sectors in pan-financial market;(ⅴ) The contagion source of financial systemic risk shows an obvious path of leaping and changing characteristics, and the contagion source of systemic risk (source of impact) shows the evolution law of "bank → real estate → new energy → temperature difference," which means that the temperature difference has become the contagion source of systemic financial risk. This study provides a reference for preventing and resolving systemic risks under pan-financial market scenario and provides a basis for improving the current macroprudential regulatory framework.

show abstract

Section: Review Of the Literature Reviewmentioning

confidence: 99%

Temperature difference and systemic risk: Evidence from LASSO-VAR-DY based on China’s pan-financial market

Jia,

2024

PLoS ONE

View full text Add to dashboard Cite

show abstract

“…The standard deviation of temperature should be a better measure than the absolute change in temperature [59]. Song [60] measured the impact of temperature deviation on bank systemic risk by using quarterly temperatures versus historical averages. In this paper, the Chinese market is studied.…”

Section: Independent Variable and Mediating Variablesmentioning

confidence: 99%

The Impact of Climate Change on Financial Stability

Wu,

Liu,

Lin

2023

Sustainability

View full text Add to dashboard Cite

Climate risks and response policies have important impacts on a country’s macroeconomic development and financial stability. Based on the data from 2005 to 2020, this paper takes temperature deviation as the main representative variable of climate risk to study the impact of climate change on financial stability. The two-way fixed-effect results show that there is a negative relationship between temperature deviation and financial stability, and the influence of temperature deviation has a lag. However, the effects of temperature deviation on financial stability varied across the samples. The central provinces, non-coastal provinces, non-Yangtze River Delta and Pearl River Delta provinces, and risk zone I had stronger temperature responses and financial stability was affected to a greater extent. The other regions experienced less of an impact.

show abstract

The impact of climate change on banking systemic risk

Bai

et al. 2023

Economic Analysis and Policy

View full text Add to dashboard Cite

Temperature shocks and bank systemic risk: Evidence from China

Cited by 9 publications

References 18 publications

Temperature difference and systemic risk: Evidence from LASSO-VAR-DY based on China’s pan-financial market

Temperature difference and systemic risk: Evidence from LASSO-VAR-DY based on China’s pan-financial market

The Impact of Climate Change on Financial Stability

The impact of climate change on banking systemic risk

Contact Info

Product

Resources

About