Kapfhammer, Felix Larsen, Vegard H. Thorsrud, Leif Anders
Year of Publication:
CESifo Working Paper No. 8788
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.