Time-varying effects of extreme weather shocks on output growth of the United States
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Date
Authors
Sheng, Xin
Gupta, Rangan
Cepni, Oguzhan
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
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 new class of time-varying parameter vector autoregressive (endogenous TVP-VAR) model, whereby the identified structural innovation is allowed to influence the dynamics of the coefficients in the model unlike in traditional TVP-VARs. Our results provided evidence 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.
Description
DATA AVAILABILITY :
Data will be made available on request.
Keywords
Severe weather, Endogenous TVP-VAR, Growth, Inflation, United States (US), Time-varying parameter vector autoregression (TVP-VAR), Climate change, SDG-08: Decent work and economic growth, SDG-13: Climate action
Sustainable Development Goals
SDG-08:Decent work and economic growth
SDG-13:Climate action
SDG-13:Climate action
Citation
Sheng, X., Gupta, R. & Cepni, O. 2024, 'Time-varying effects of extreme weather shocks on output growth of the United States', Finance Research Letters, vol. 70, art. 106318, pp. 1-14, doi : 10.1016/j.frl.2024.106318.