Fiat and Metallic Money Under Climate Uncertainty: Sources or Shields?

ABSTRACT

This paper examines how environmental uncertainty interacts with international fiat currencies and metallic (commodity) money across market regimes. Applying a Quantile‐VAR framework, we construct extended joint connectedness, averaged dynamic connectedness, and network connectedness measures at bear, normal, and bull quantiles. Environmental uncertainty is more strongly connected with fiat currencies than with monetary metals, and systemwide connectedness intensifies in tail regimes. In normal and bull markets, climate risk indices are net receivers rather than drivers of systemic risk transmission. The Canadian dollar is the most consistent net absorber of spillovers. Gold largely retains its safe‐haven role during bear markets, whereas several precious metals become net transmitters under bull‐market conditions. Iron ore and aluminium emerge as the strongest stabilizers among industrial metals in optimistic market environments. Overall, the findings highlight the regime‐dependent responses of monetary assets to climate‐related uncertainty and their distinct roles in systemic risk transmission.