Weather, credit, and economic fluctuations: Evidence from China

Zhenzhu Chen, Li Li and Yao Tang

Journal of Economic Behavior & Organization, 2024, vol. 221, issue C, 406-422

Abstract: We constructed an Extreme Weather Index to measure extreme weather risks in China. Analyzing macroeconomic data through a structural vector auto-regression model suggests that a negative weather shock leads to persistently low GDP and credit obtained by non-financial firms. In our regression analysis of a panel of firms listed in China, the negative effects of weather shocks on firm level loans were statistically and practically significant. Further analysis suggests that credit risk and expectations are two important impact channels. A high existing credit risk or low confidence among firm managers, amplifies the negative effects of extreme weather on loans.

Keywords: Extreme weather shocks; Credit risk; Expectations; Chinese economy (search for similar items in EconPapers)
JEL-codes: E32 E44 G32 Q54 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Weather, Credit, and Economic Fluctuations: Evidence from China (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:221:y:2024:i:c:p:406-422

DOI: 10.1016/j.jebo.2024.03.025

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