The Macroeconomic Impact of Global and Country-Specific Climate Risk

Joseph Byrne and Prince Asare Vitenu-Sackey ()
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Prince Asare Vitenu-Sackey: University of Strathclyde

Environmental & Resource Economics, 2024, vol. 87, issue 3, No 4, 655-682

Abstract: Abstract This paper examines the impact of climate risk on macroeconomic activity for thirty countries using over a century of panel time series data. The key innovation of our paper is to use a factor stochastic volatility approach to decompose climate change into global and country-specific climate risk and to consider their distinct impact upon macroeconomic activity. To allow for country heterogeneity, we also differentiate the impact of climate risk upon advanced and emerging economies. While the existing literature has focused on country based climate risk shocks, our results suggest idiosyncratic or country-specific climate risk shocks are relatively unimportant. Global climate risk, on the other hand, has a negative and relatively more important impact on macroeconomic activity. In particular, we find that both advanced and emerging countries are adversely impacted by global climate risk shocks.

Keywords: Global climate risk; Factor stochastic volatility model; Macroeconomic activity; Bayesian panel VAR (search for similar items in EconPapers)
JEL-codes: C13 E00 Q56 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10640-023-00831-0

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