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Look up and ahead: How climate scenarios affect European sovereign credit risk
We provide empirical evidence on the potential evolution of future climate-related impacts on sovereign credit risk in Europe, measured through sovereign Credit Default Swap (CDS) spreads and risk-neutral implied probabilities of default. We analyze the interaction between countries’ climate risk exposure and their fiscal and financial fundamentals using a panel model estimated with annual data for 24 European countries over the period 2010–2022. […]