The positive relationship between real exchange rates and natural resource income is well understood and studied. However, climate change and the transition to a lower-carbon economy now challenges this relationship. We document this by proposing a...
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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The positive relationship between real exchange rates and natural resource income is well understood and studied. However, climate change and the transition to a lower-carbon economy now challenges this relationship. We document this by proposing a novel news media-based measure of climate change transition risk and show that when such risk is high, major commodity currencies experience a persistent depreciation and the relationship between commodity price fluctuations and currencies tends to become weaker.
