A1023
Title: The effect of climate change on economic growth: A structural global vector autoregressive approach
Authors: Maryam Ahmadi - Fondazione Eni Enrico Mattei (FEEM) (Italy) [presenting]
Chiara Casoli - Fondazione Eni Enrico Mattei (Italy)
Matteo Manera - DEMS Bicocca University (Italy)
Daniele Valenti - Fondazione Eni Enrico Mattei (Italy)
Abstract: Identifying the effect of climate shocks on economic growth is central to designing effective policies aiming at managing the future global climate change challenge. We investigate the effects of temperature and precipitations shocks on economic growth across different countries by means of a new methodology, namely a structural Bayesian Global VAR model that imposes economic interpretation to the shocks, accounts for cross-sectional spillovers among countries as well as endogeneity of the climate variables with respect to the economy. The results show that most countries are negatively affected by climate shocks, suggesting that, contrary to a consistent strand of the literature that finds hot and poor countries paying the most, climate shocks negatively affect also rich and cold countries' GDP growth. Accounting for the interdependence across countries, we find that trade plays a mitigation role in the responses of the economic growth to climate shocks.
