Climate Uncertainty and Financial Subordination: Evidence From a Two‐Country Stock‐Flow Consistent Model

D'Orsi, Riccardo (2026) Climate Uncertainty and Financial Subordination: Evidence From a Two‐Country Stock‐Flow Consistent Model. European Financial Management. ISSN 1354-7798

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Abstract

In the face of climate change, uncertainty is deep, systemic, and does not propagate amid an institutional vacuum, contrary to assumptions often underlying existing macroeconomic climate models. The paper presents a macroeconomic Stock‐Flow Consistent model to examine the impact of climate‐related financial pressures under fundamental uncertainty within a hierarchical international monetary and financial system. It demonstrates how climate uncertainty induces asymmetric cross‐country interactions, highlighting the potential for the climate catastrophe to exacerbate regional economic disparities. These findings call for a more structural approach to a just transition in which financial governance is geared towards global equity and long‐term sustainability.

Item Type:	Article
Identification Number:	10.1111/eufm.70087
Dates:	Date Event 30 May 2026 Accepted 10 September 2026 Published Online
Uncontrolled Keywords:	climate uncertainty, currency hierarchy, financial subordination, international capital flows, stock-flow consistent models
Subjects:	CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance
Divisions:	Business School > Accountancy, Finance and Economics
Depositing User:	Gemma Tonks
Date Deposited:	11 Nov 2026 14:55
Last Modified:	11 Nov 2026 14:55
URI:	https://www.open-access.bcu.ac.uk/id/eprint/17308

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