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Climate-induced geopolitical risk and financial interdependence in Europe: A systemic transition perspective

Author

Listed:
  • Riso, Luigi
  • Vacca, Gianmarco
  • Zoia, Maria

Abstract

In recent years, climate change has given cause for concern for the stability of the global economy, particularly financial stability. In this regard, its effects on the overall geopolitical set-up are also apparent. This work aims at disentangling the relationship among these three dimensions, via a streamlined set of econometric analyses. For Germany, France, Italy and Spain, the impact of extreme climate events on the geopolitical risk index is first investigated. The resulting climate-driven geopolitical risk is then related to each country’s financial stress index. The results that emerge from the empirical analysis highlight that the geopolitical risk induced by climate events plays a significant role in the financial stability of these countries. The impact of this type of risk turns out to depend on the specific territorial characteristics of the countries, as well as the peculiar policies and targeted measures to contain adverse climate events adopted by the various countries

Suggested Citation

  • Riso, Luigi & Vacca, Gianmarco & Zoia, Maria, 2026. "Climate-induced geopolitical risk and financial interdependence in Europe: A systemic transition perspective," Structural Change and Economic Dynamics, Elsevier, vol. 77(C), pages 23-42.
    • Handle: RePEc:eee:streco:v:77:y:2026:i:c:p:23-42
    DOI: 10.1016/j.strueco.2025.12.010
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • G01 - Financial Economics - - General - - - Financial Crises
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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