Abstract
This thesis is an empirical examination on the impact of climate change on banking system stability in selected Sub-Saharan economies. The thesis leverages on selected Sub-Saharan economies by targeting 29 economies from 1996-2017 based on available data. In the first objective, the long-term and short-term impact of climate change on banking system stability is examined through a CS-ARDL estimation technique. In this objective, the overall findings reveal that there is no long-term and short-term impact of climate change variables on banking system stability. The second objective decomposes climate change variables into partial sums (+/-) to investigate the asymmetric impact of climate change on banking system stability using a panel non-linear ARDL model. It is concluded that in the long-term both positive and negative precipitation as well as climate change index harms banking system stability. On the other hand, it was found that negative greenhouse gas is pernicious to banking system stability in the short-term. The third objective assesses the threshold at which climate change impacts banking system stability by applying the panel threshold regression. It is concluded that temperature reported a threshold of -0.7316 oC. Further, precipitation had a threshold of 7.1646mm whiles greenhouse gas threshold was 3.6680 GtCO2eq. Last, climate change index recorded a threshold of -0.1751 percent. Overall, a non-linear relationship was established between climate change variables and banking system stability. In the fourth objective, the macroeconomic transmission channels through which climate change impacts banking system stability are examined using a wavelet coherence approach. The overall findings indicate that macroeconomic indicators such as inflation, labor productivity, real gross domestic product and real exchange rate serve as pathways through which climate change impacts banking system stability in selected Sub-Saharan economies. In the final objective, the study assesses the impact of climate change shocks on banking system resilience. The findings suggest that in the long-term the banking systems in selected Sub-Saharan economies are resilient to temperature shock. Contrary to this epiphany, the banking systems in selected Sub-Saharan economies are not resilient to climate change shocks such as precipitation shock, greenhouse gas shock and climate change index shock in the long-term. Further, it was found that the banking systems in selected Sub-Saharan economies are only resilient to precipitation shock in the short-term. On that premise, we recommend that climate change risks are uncertainties that impede banking system operations, as such policies with concerns or reservations should be revised or discarded. Withal, it is important for government of SSA economies to develop climate change policies conformable to sectors in the scheme of climate change adaptation strategies.
Keywords: Climate Financial Econometrics, Climate Change, Banking System Stability, Banking System Resilience Sub-Saharan Economies, Panel Data Techniques
JEL Classifications: C33, C58, G21, Q54