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

Xin Sheng, Rangan Gupta, Oguzhan Cepni

Research output: Working paperResearch

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.
Original languageEnglish
Place of PublicationPretoria
PublisherUniversity of Pretoria
Number of pages15
Publication statusPublished - Aug 2023
SeriesWorking Paper Series / Department of Economics. University of Pretoria
Number2023-24

Keywords

  • Severe weather
  • Endogenous TVP-VAR
  • Growth
  • Inflation

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