Friday, 26 February 2021 20:12

The Impact of Climate on Economic and Financial Cycles: A Markov-switching Panel Approach

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Billio M, Casarin R, De Cian E, Mistry M, Osuntuyi A

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  • Published in: Billio M., Casarin R., De Cian E., Mistry M., Osuntuyi, A., Working Paper Series - Department of Economics of the Ca’ Foscari University of Venice (ISSN 1827-3580), Department of Economics, University of Venice "Ca' Foscari, vol. 2021/03, pp. 1-64
  • Year: 2021
  • Abstract: This paper examines the impact of climate shocks on 13 European economies analysing jointly business and financial cycles, in different phases and disentangling the effects for different sector channels. A Bayesian Panel Markov-switching framework is proposed to jointly estimate the impact of extreme weather events on the economies as well as the interaction between business and financial cycles. Results from the empirical analysis suggest that extreme weather events impact asymmetrically across the different phases of the economy and heterogeneously across the EU countries. Moreover, we highlight how the manufacturing output, a component of the industrial production index, constitutes the main channel through which climate shocks impact the EU economies.
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Monica Billio

Full Professor in Econometrics - Ca’ Foscari University of Venice, Department of Economics

Promoting partner, Scientific Committees and Director of the Area Data Science

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