Climate disasters and annual inflation: International evidence from OECD countries

Ahmed Alhuseen, Osama Abu Zied Nogid EL Nour and Ismail Alsafi

Littera Scripta, 2026, vol. 19, issue 1, 55-69

Abstract: Climate-related disasters have become increasingly frequent and severe, raising concerns regarding their potential macroeconomic consequences, particularly their influence on inflation dynamics. This study investigates whether climate disasters significantly affect annual consumer price inflation across OECD countries during the period 2000–2024. Using an unbalanced panel dataset comprising 941 country-year observations from 38 OECD economies, the analysis employs a comprehensive panel-data framework, including pooled ordinary least squares, fixed-effects, random-effects, and two-way fixed-effects models with country-clustered robust standard errors. Climate disasters are measured using both occurrence indicators (floods, storms, droughts, extreme temperature events, and wildfires) and disaster severity, represented by the logarithm of reported economic damage. The Hausman specification test supports the use of the fixed-effects estimator, indicating the presence of unobserved country-specific heterogeneity. Across all model specifications, neither aggregate disaster severity nor individual disaster categories exhibit statistically significant effects on annual inflation after controlling for country and year fixed effects. These findings suggest that advanced OECD economies possess sufficient institutional resilience, effective policy responses, and diversified economic structures to mitigate the inflationary consequences of climate-related shocks. The study contributes to the growing literature on climate economics by providing cross-country evidence that the macroeconomic impact of climate disasters on aggregate annual inflation is limited within developed economies. Future research should investigate higher-frequency data, sector-specific price dynamics, and additional macroeconomic controls to further examine the transmission mechanisms linking climate disasters and inflation.

Keywords: Climate disasters; Inflation; OECD countries; Panel data; Fixed effects; Natural disasters; Climate economics (search for similar items in EconPapers)
JEL-codes: C23 E31 Q54 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://littera-scripta.com/articles/climate-disas ... cd-countrie-659ecc70 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsg:littra:2026-004

DOI: 10.36708/LS.2026.I01.004

Access Statistics for this article

More articles in Littera Scripta from VSTE
Bibliographic data for series maintained by Robin Kunju Mol Raj ().