Browsing by Author "Fallahramezani, Zoya"

This study examines the influence of climate change on sovereign default risk in emerging markets, particularly focusing on Argentina, through a comparative analysis of scenarios with and without climate-related challenges. It assesses the potential consequences for government bond pricing, highlighting the increased probability of default when economic output declines. The analysis utilises a model inspired by Arellano (2008) to establish a reference point for economic and financial stability in the absence of climate change. Subsequently, the model is adapted to incorporate the effects of climate change, including extreme weather events, which is increasingly impacting the finances of country. The results show that output losses caused by climate change have a direct effect on government funding, which raises the chances of default. Moreover, bond prices rise less in climate affected scenarios compared to climate-neutral situations.