Climate change can have significant impacts on a country’s economy, including its currency, through changes in the physical environment, such as increased frequency and intensity of natural disasters, sea level rise, and variations in temperature and rainfall patterns. These physical impacts can affect investments, human capital development, and economic growth, and can also lead to increased sovereign borrowing costs and asset value declines.
Some countries, particularly low-income and developing countries, may be more vulnerable to the physical impacts of climate change due to their lack of resources and infrastructure to prepare for and respond to disasters.
A framework can be created to analyze the physical risks of climate change on a country’s currency by using data on a country’s vulnerability to climate change, which is determined by its exposure, sensitivity, and adaptive capacity to these impacts. This vulnerability can be validated and mapped to economic losses and human lives affected by natural disasters.
The physical impacts of climate change are expected to increase in the future, and it is important for countries to consider these risks in their economic planning and decision-making.
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