Predictability of economic slowdowns in advanced countries over eight centuries: the role of climate risks

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Authors

Gupta, Rangan
Nel, Jacobus
Salisu, Afees A.
Ji, Qiang

Journal Title

Journal ISSN

Volume Title

Publisher

Elsevier

Abstract

We analyze the predictive content of climate risks, proxied by change in global temperature anomaly and its volatility, on a dummy variable capturing periods of zero and negative growth rates of eight industrialized countries. In this regard, we apply a Probit model to longest possible historical datasets available for these countries covering 1311 till 2020, and control for inflation and interest rates. We find strong evidence that changes in global temperature anomaly and/or its stochastic volatility in particular, tend to predict slowdown or stagnation in all the eight economies at the different predictive horizons considered.

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DATA AVAILABILITY : Data will be made available on request.

Keywords

Growth, Climate risks, Probit model, Predictions, SDG-08: Decent work and economic growth

Sustainable Development Goals

Citation

Gupta, R., Nel, J., Salisu, A.A. et al. 2023, 'Predictability of economic slowdowns in advanced countries over eight centuries: the role of climate risks', Finance Research Letters, vol. 54, art. 103795, pp. 1-5, doi : 10.1016/j.frl.2023.103795.