How do rising temperatures affect inflation expectations?

Dimitris Georgarakos, Geoff Kenny, Justus Meyer and Maarten van Rooij

No 3132, Working Paper Series from European Central Bank

Abstract: Global temperatures are rising rapidly, yet little is known about how climate change affects consumer expectations about the macroeconomy. We address this gap by conducting a series of experiments within a large-scale, population-representative survey of euro area consumers. A 0.5°C rise in global temperatures increases five-year-ahead inflation expectations by 0.65 percentage points. Effects are stronger among consumers with greater awareness of climate change. Additionally, consumers expect adverse effects of global warming on economic growth, employment, and tax burden. Many consumers demonstrate limited willingness to pay for mitigating further temperature increases. Instead, they place primary responsibility for climate action on governments. JEL Classification: D12, E31, E52, H31, Q54

Keywords: climate change; Consumer Expectations Survey (CES); global warming; inflation expectations; Randomized Control Trial (RCT) (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-dcm and nep-env
Note: 483508
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Working Paper: How do rising temperatures affect inflation expectations? (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253132

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