The Expectations Channel of Climate Change: Implications for Monetary Policy

Alexander Dietrich, Müller, Gernot and Raphael Schoenle
Authors registered in the RePEc Author Service: Gernot J. Müller

No 15866, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We measure expectations about the short-run economic impact of climate change in a representative survey of US consumers. Respondents expect not much of an impact on GDP growth, but perceive a high probability of costly, rare disasters---suggesting they are salient of climate change. Furthermore, expectations vary systematically with socioeconomic characteristics, media consumption, various information treatments and over time. We calibrate a New Keynesian model to key results of the survey and spell out two implications for monetary policy. First, climate-change related disaster expectations lower the natural rate of interest substantially. Second, time-variation in disaster expectations contributes to cyclical fluctuations.

Keywords: Climate change; Disasters; Households expectations; Survey; Media focus; Monetary policy; Natural rate of interest; Paradox of communication (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-cba, nep-dge, nep-env, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: The Expectations Channel of Climate Change:Implications for Monetary Policy (2021)
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