Temperature and quarterly economic activity: panel data evidence from Mexico

Jesús Arellano-González and Miriam Juárez-Torres

No 2025-02, Working Papers from Banco de México

Abstract: In this paper, we estimate the effect of temperature on the economic activity of Mexico using 42 years of quarterly panel data on economic growth at the state level. Our findings reveal a concave relationship between quarterly economic growth and quarterly average temperature that is maximized at around 20 degrees Celsius. Average temperatures above this level are associated with lower economic growth rates with sharper declines for agricultural and low-income states. Temperature affects aggregate economic growth mainly through the effect it has on the growth of the primary and secondary sectors. The findings of this paper suggest that by 2100, in the absence of adaptation and under an intermediate scenario of climate change, global warming might cause a statistically significant reduction of quarterly economic growth.

Keywords: Quarterly economic growth; Temperature; Climate change; Panel data (search for similar items in EconPapers)
JEL-codes: O44 Q51 Q54 R11 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-env and nep-gro
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