Demand or Supply? An empirical exploration of the effects of climate change on the macroeconomy

Matteo Ciccarelli and Fulvia Marotta
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Matteo Ciccarelli: European Central Bank
Fulvia Marotta: Queen Mary University of London

No 933, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Using a panel of 24 OECD countries for the sample 1990-2019 and a standard macroeconomic framework, the paper tests the combined macroeconomic effects of climate change, environmental policies and technology. Overall, we find evidence of significant macroeconomic effects over the business cycle: physical risks act as negative demand shocks while transition risks as downward supply movements. The disruptive effects on the economy are exacerbated for countries without carbon tax or with a high exposure to natural disasters. In general, results support the need for a uniform policy mix to counteract climate change with a balance between demand-pull and technology-push policies.

Keywords: Environmental policy; Environment-related technologies; Physical risks; Business cycle; SVAR (search for similar items in EconPapers)
JEL-codes: C11 C33 E32 E58 Q5 (search for similar items in EconPapers)
Date: 2021-12-07
New Economics Papers: this item is included in nep-ene, nep-env and nep-mac
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:933

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