24 April 2018 from 11:00 to 12:30

U.S.E. Seminar met Gauthier Vermandel (Paris-Dauphine): Weather Shocks, Climate Change and Business Cycles

U.S.E. Seminar with Gauthier Vermandel (Paris-Dauphine): Weather Shocks, Climate Change and Business Cycles.

"How much do weather shocks matter? The literature addresses this question in two isolated ways: either by looking at long-term effects through the prism of theoretical models, or by focusing on short-term effects using empirical analysis. We propose a framework to bring together both the short and long-term effects through the lens of an estimated DSGE model with a weather-dependent agricultural sector. In the short-run, our analysis underlines the key role of weather as a driver of business cycles over the sample period."

Weather shocks enlarge the welfare cost

"A weather shock – as measured by a drought index – acts as a negative supply shock that causes a recession, boosts the non-agricultural sector and entails current account deficits. Taking a long-term perspective, a welfare analysis reveals that weather shocks are not a free lunch: the welfare cost of the weather is currently estimated at 0.40% of permanent consumption. Climate change - measured by an increasing variance of weather shocks - dramatically
enlarges the welfare cost in a non-linear fashion, peaking to 0.58% in the worst experiment, Climate change also acts as an accelerator of the volatility of key macroeconomic variables, such as agricultural output, total output and the
real exchange rate."
 

Start date and time
24 April 2018 11:00
End date and time
24 April 2018 12:30
More information
U.S.E. Seminar Series