American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Severe Weather and the Macroeconomy
American Economic Journal: Macroeconomics
vol. 17,
no. 2, April 2025
(pp. 315–41)
Abstract
We investigate the impact of severe weather shocks on the US macroeconomy over the past 60 years. Using a nonlinear vector autoregressive model, we find robust evidence of time-varying effects. While negligible at the beginning of the sample, the impact becomes significant at the end, where an increase in the severe weather index reduces aggregate industrial production and consumption growth rates, and raises aggregate unemployment and inflation rates. The effects are persistent for up to 20 months. Our findings suggest limited adaptation to the increased severity of weather in the United States, at least at the macroeconomic level.Citation
Kim, Hee Soo, Christian Matthes, and Toàn Phan. 2025. "Severe Weather and the Macroeconomy." American Economic Journal: Macroeconomics 17 (2): 315–41. DOI: 10.1257/mac.20220329Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E23 Macroeconomics: Production
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E31 Price Level; Inflation; Deflation
- Q54 Climate; Natural Disasters and Their Management; Global Warming