Time-Varying Effects of Extreme Weather Shocks on Output Growth of the United States

Xin Sheng (), Rangan Gupta and Oguzhan Cepni
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Xin Sheng: Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, United Kingdom

No 202324, Working Papers from University of Pretoria, Department of Economics

Abstract: This study investigates the impact of a structural shock to a metric of extreme weather, identified using sign restrictions, on output growth (and inflation) in the United States (US) from 1961 to 2022, using a time-varying parameter vector autoregressive (TVP-VAR) model. Our results show that severe weather shocks adversely affect output growth (and inflation) over the forecast horizon of one- to twelve-quarter-ahead. More importantly, we find that the effect of extreme weather on the US macroeconomic variables is indeed time-varying, with the impacts becoming smaller in recent times, possibly due to improved adaptation to climate change.

Keywords: Severe weather; Endogenous TVP-VAR; Growth; Inflation (search for similar items in EconPapers)
JEL-codes: C32 E31 E32 Q54 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2023-08
New Economics Papers: this item is included in nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202324

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