A Bayesian panel VAR model to analyze the impact of climate change on high-income economies

Florian Huber, Tamás Krisztin and Michael Pfarrhofer

Papers from arXiv.org

Abstract: In this paper, we assess the impact of climate shocks on futures markets for agricultural commodities and a set of macroeconomic quantities for multiple high-income economies. To capture relations among countries, markets, and climate shocks, this paper proposes parsimonious methods to estimate high-dimensional panel VARs. We assume that coefficients associated with domestic lagged endogenous variables arise from a Gaussian mixture model while further parsimony is achieved using suitable global-local shrinkage priors on several regions of the parameter space. Our results point towards pronounced global reactions of key macroeconomic quantities to climate shocks. Moreover, the empirical findings highlight substantial linkages between regionally located climate shifts and global commodity markets.

Date: 2018-04, Revised 2021-02
New Economics Papers: this item is included in nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1804.01554

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