High Temperature Shocks are Supply Shocks. Evidence from One Century of Monthly Data

Jules Baleyte, Guillaume Bazot, Eric Monnet and Matthias Morys

No 19682, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Are temporary high-temperature anomalies supply or demand shocks? And how do central banks respond to them? We investigate these questions with a new historical dataset covering 14 European countries over a full century and accounting for nonlinearities via state-dependent impulse response functions in the vein of Auerbach and Gorodnichenko (2012). The following stylized facts emerge: 1) a high temperature shock is a negative supply shock (lower output growth and higher inflation); 2) the impact is usually less pronounced - but more persistent - on inflation than on output; 3) central banks have responded to these shocks by lowering their interest rate; 4) the macroeconomic impact of individual high temperature shocks on inflation has diminished over time, but the frequency of these shocks has increased.

Keywords: Supply shocks; Climate shocks; Climate change mitigation; Climate policy; Monetary policy; Inflation (search for similar items in EconPapers)
Date: 2024-11
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19682 (application/pdf)

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:cpr:ceprdp:19682

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19682

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().