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Transition-induced financial volatility in Asian countries: Evidence from clean energy finance and portfolio flows

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  • Khaliq, Abdul
  • Farooq, Omar

Abstract

This study investigates the impact of international clean energy finance on portfolio flow volatility in Asian countries. Clean energy finance is associated with reduced portfolio flow volatility across short-run, medium-run, and long-run horizons. The stabilizing effect is most pronounced at the medium- and long-run horizons, supporting a commitment channel in which sustained clean energy finance reduces policy uncertainty in recipient countries. The stabilizing effect is significantly amplified in net energy-importing economies. The positive and significant interaction between international financial flows and energy import dependence suggests that countries reliant on imported fossil fuels experience transition-induced supply disruptions that can partially offset. Mechanism tests indicate that clean energy finance reduces fossil fuel dependence, with the structural channel operating through energy import dependence rather than through changes in domestic fossil fuel consumption shares. This underscores the necessity for differentiated climate finance policies that address structural energy vulnerability.

Suggested Citation

  • Khaliq, Abdul & Farooq, Omar, 2026. "Transition-induced financial volatility in Asian countries: Evidence from clean energy finance and portfolio flows," Finance Research Letters, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:finlet:v:98:y:2026:i:c:s1544612326004150
    DOI: 10.1016/j.frl.2026.109885
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