Cross-border financial flows and global warming in a two-area ecological SFC model

Highlights •The search for safe financial assets can affect economic growth and financial stability. •The search for green financial assets can exacerbate climate change if capitals are free and exchange rates are floating. •Lacking a strong coordination, green government policies are likely to generate negative side effects for other areas. •Ecological efficiency gains are likely to be offset by the higher growth rate of the economy (rebound effect). •The effectiveness of green behaviours and policies depends on the impact of cross-border financial flows on exchange rates.