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Climate policy uncertainty through production networks: Evidence from the stock market

Author

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  • Yao, Xiaoyang
  • He, Wenjing
  • Li, Jianfeng
  • Le, Wei

Abstract

This thesis provides a deeper insight into quantifying the part of the production network in explaining spillovers of climate policy uncertainty (CPU) shocks to stock returns. By introducing world input–output data into the spatial vector autoregression (SAR) model, we distinguish the direct impact of CPU and the indirect impact occurring through the production network. The results show that more than 60 % of CPU’ effect on the stock market can be explained by the spillovers induced by the production network. In addition, the indirect effect is more obvious in the long term than in the short term.

Suggested Citation

  • Yao, Xiaoyang & He, Wenjing & Li, Jianfeng & Le, Wei, 2023. "Climate policy uncertainty through production networks: Evidence from the stock market," Economics Letters, Elsevier, vol. 233(C).
    • Handle: RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523004317
    DOI: 10.1016/j.econlet.2023.111405
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    References listed on IDEAS

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    Cited by:

    1. Wu, Guo & Hu, Guoheng, 2024. "Asymmetric spillovers and resilience in physical and financial assets amid climate policy uncertainties: Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 208(C).
    2. Chen, Jiusheng & Wang, Xianning, 2025. "Climate policy uncertainty and the Chinese sectoral stock market: A multilayer network analysis," Economic Systems, Elsevier, vol. 49(1).
    3. Tommaso, Caterina Di & Foglia, Matteo & Pacelli, Vincenzo, 2024. "The impact of climate policy uncertainty on the Italian financial market," Finance Research Letters, Elsevier, vol. 69(PA).
    4. Li, Jianfeng & Yao, Xiaoyang & Wang, Hui & Le, Wei, 2024. "Hedging the climate change risks of China's brown assets: Green assets or precious metals?," International Review of Economics & Finance, Elsevier, vol. 94(C).
    5. Wu, Ruirui, 2026. "How do climate risk and geopolitical risk impact shipping markets?," Research in International Business and Finance, Elsevier, vol. 81(C).
    6. Hu, Xin & Zhu, Bo, 2025. "Do climate risks matter for intersectoral systemic risk spillovers? Evidence from China," Finance Research Letters, Elsevier, vol. 75(C).
    7. Mingyu Shu & Jieli Wang & Menglong Chen & Hanru Wang, 2025. "Multi-scale Dynamic Correlation Between Climate Shock and China's Stock Market: Evidence Based on High Frequency Data," Computational Economics, Springer;Society for Computational Economics, vol. 66(3), pages 2265-2304, September.
    8. Yao, Xiaoyang & Maimaitijiang, Sairidaer & Li, Jianfeng & Le, Wei, 2025. "How financial markets respond to climate policy uncertainty: A dynamic resilience analysis," Journal of Commodity Markets, Elsevier, vol. 39(C).
    9. He, Wenjing & Yao, Xiaoyang & Sun, Xiaolei & Le, Wei & Yi, Ronghua, 2024. "Dynamic spillovers of green, brown, and financial industries under the low-carbon transition: Evidence from China," Energy Economics, Elsevier, vol. 139(C).
    10. Ruge-Murcia, Francisco, 2024. "Asset prices in a production network," European Economic Review, Elsevier, vol. 166(C).
    11. Chiang, Thomas C., 2025. "The effect of climate policy uncertainty and induced risks on US aggregate and sectoral stock returns," Research in International Business and Finance, Elsevier, vol. 76(C).
    12. repec:ers:ijfirm:v:16:y:2026:i:1:p:119-137 is not listed on IDEAS
    13. Yuan, Jiayuan & Zhu, Weineng & Huang, Zishan & Zhu, Huiming, 2026. "Time-frequency quantile effect of global uncertainty on stock markets: evidence from wavelet decomposition," The North American Journal of Economics and Finance, Elsevier, vol. 81(C).
    14. Yao, Yinhong & Feng, Zhuoqi & Liu, Xueyong, 2025. "Heterogeneous information transmission between climate policy uncertainty and Chinese new energy markets: A quantile-on-quantile transfer entropy method," International Review of Financial Analysis, Elsevier, vol. 103(C).
    15. Lu, Peng & Wang, Ziwei & Lu, Kun, 2025. "Climate Disaster, Investor Attention, and Tail Risk: Graph-based CoVaR," Economics Letters, Elsevier, vol. 253(C).
    16. Niu, Hongli & Hu, Wenwen, 2024. "Static and dynamic interdependencies among natural gas, stocks of global major economies and uncertainty," Resources Policy, Elsevier, vol. 94(C).
    17. Leirvik, Thomas, 2025. "Interactive effects of economic, geopolitical, and climate risks on commodity volatility," Journal of Commodity Markets, Elsevier, vol. 40(C).

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