The Effects of Weather Shocks on Economic Activity: What are the Channels of Impact?

By Sebastian Acevedo Mejia, Mico Mrkaic, Natalija Novta, Evgenia Pugacheva, Petia Topalova

June 13, 2018

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Sebastian Acevedo Mejia, Mico Mrkaic, Natalija Novta, Evgenia Pugacheva, and Petia Topalova. The Effects of Weather Shocks on Economic Activity: What are the Channels of Impact?, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Global temperatures have increased at an unprecedented pace in the past 40 years. This paper finds that increases in temperature have uneven macroeconomic effects, with adverse consequences concentrated in countries with hot climates, such as most low-income countries. In these countries, a rise in temperature lowers per capita output, in both the short and medium term, through a wide array of channels: reduced agricultural output, suppressed productivity of workers exposed to heat, slower investment, and poorer health. In an unmitigated climate change scenario, and under very conservative assumptions, model simulations suggest the projected rise in temperature would imply a loss of around 9 percent of output for a representative low-income country by 2100.

Subject: Climate change, Emerging and frontier financial markets, Environment, Expenditure, Financial markets, Health, Population and demographics, Production, Productivity, Public expenditure review

Keywords: Climate change, Climate policy, Dependent variable, Developing country, Economic activity, Emerging and frontier financial markets, Environoment and growth, Global, Infant mortality, Productivity, Productivity effect, Public expenditure review, Temperature increase, Temperature shock, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/144
Stock No:

WPIEA2018144
ISBN:

9781484363027
ISSN:

1018-5941

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