Physical climate change and the sovereign risk of emerging economies

Journal of Economic Structures

The Official Journal of the Pan-Pacific Association of Input-Output Studies (PAPAIOS)

Table 6 Baseline results: temperature anomalies and sovereign risk

	(1)	(2)	(3)	(4)	(5)	(6)
	\(\Delta\)EMBI	\(\Delta\)EMBI	\(\Delta\)EMBI	\(\Delta\)EMBI	\(\Delta\)EMBI	\(\Delta\)EMBI
HistoricalTempAnomaly	− 0.0614** (0.0267)	− 0.0798*** (0.0269)	− 0.0118 (0.0507)
DeviationAdjustedTempAnomaly				− 0.219*** (0.0681)	− 0.233*** (0.0633)	− 0.235*** (0.0798)
Precipitation		0.197 (0.416)	0.223 (0.363)		0.110 (0.424)	0.0385 (0.375)
\(\Delta\)VIX		− 0.151*** (0.0164)			− 0.151*** (0.0164)
\(\Delta\)GlobalGovernmentBondIndex		0.0691* (0.0370)			0.0690* (0.0370)
\(\Delta\)US-TermSpread		− 0.102 (0.199)			− 0.106 (0.199)
\(\Delta\)US-CorporateRiskPremium		− 2.445*** (0.186)			− 2.443*** (0.186)
\(\Delta\)US-10-YearTreasuryYield		− 3.689*** (0.437)			− 3.684*** (0.438)
Constant	0.740*** (0.0239)	0.688*** (0.0539)	0.679*** (0.0631)	0.777*** (0.0284)	0.722*** (0.0560)	0.786*** (0.0552)
Observations	10,006	10,006	9957	10,006	10,006	9957
R-squared	0.068	0.217	0.524	0.068	0.218	0.524
Country FE	Yes	Yes	Yes	Yes	Yes	Yes
Region\(\times\)Year FE	Yes	Yes	No	Yes	Yes	No
Region\(\times\)MonthYear FE	No	No	Yes	No	No	Yes

This table shows OLS estimation results of a panel of 54 countries from 1994m1 to 2018m12. \(\Delta\)EMBI are monthly natural log returns of a country’s EMBI index. HistoricalTempAnomaly is the difference between monthly temperature of a country and its 1901–1950 temperature average of the same month. DeviationAdjustedTempAnomaly is the anomaly measure divided by a country’s 1901–1950 average of temperature standard deviation. Precipitation is the country-specific average in 1000 mm units. \(\Delta\)VIX, \(\Delta\)US-TermSpread (10-year treasury yield minus 3-month T-Bill yield), \(\Delta\)US-CorporateRiskPremium (high corporate bond yield minus investment grade corporate bond yield) and \(\Delta\)US-10-YearTreasuryYield are in simple first differences, \(\Delta\)GlobalGovernmentBondIndex is in natural log differences. Standard errors (in parentheses) are clustered at the country level and control for heteroscedasticity and serial correlation, ***, ** and * indicate statistical significance at the 1%, 5% and 10% level, respectively. See Table 18 for variable definitions and sources