Climate fluctuations and financial stress: a frequency-dependent and asymmetric connectedness analysis of global precipitation

Abstract Understanding how environmental risks interact with business activity and financial conditions is increasingly important under heightened global uncertainty. This study examines the role of climate-related fluctuations, proxied by changes in global precipitation, within global macroeconomic and financial dynamics relevant to trade, production, and business risk. Using monthly global data from 2000 to 2025, the analysis integrates wavelet coherence with an asymmetric external decomposition connectedness framework to capture time-varying, frequency-dependent, and regime-specific interactions. The results show that precipitation fluctuation exhibits strong co-movements with financial stress and trade-related indicators, particularly during crisis periods and at medium- to long-term frequencies, while its relationship with real economic activity remains weak and intermittent. Asymmetric connectedness findings further reveal that precipitation consistently acts as a net shock receiver, with slightly stronger asymmetries under negative shocks. Overall, the findings highlight that climate-related risks materialize through financial stress and trade channels that shape business environments and strategic decision-making.