Being more connected to the global financial system actually helps poor countries survive climate change instead of making it worse for them.
March 25, 2026
Original Paper
Climate Resilience through Financial Globalization: Evidence from Low-and Middle-Income Countries
SSRN · 6434058
The Takeaway
Analyzing 42 low-income countries, researchers found that opening up to international financial markets drives investment in green bonds and low-carbon technology. The flow of global capital acts as a shock absorber that forces local institutions to improve, making the country better at handling climate disasters.
From the abstract
This study examines the nexus between financial globalization and climate resilience across a panel of 42 low-and middle-income countries (LMICs) spanning 1995-2021. Employing a rigorous empirical framework that combines two-stage least squares (2SLS) instrumental variables (IV) and generalized method of moments (GMM) estimations, the analysis addresses potential endogeneity and dynamic feedback concerns. Controlling for cross-sectional dependence and serial correlation via Driscoll-Kraay standa