Being more connected to the global financial system actually helps poor countries survive climate change instead of making it worse for them.
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.
Climate Resilience through Financial Globalization: Evidence from Low-and Middle-Income Countries
SSRN · 6434058
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