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

41 Pages Posted: 1 Aug 2018

See all articles by Sebastian Acevedo Mejia

Sebastian Acevedo Mejia

International Monetary Fund (IMF)

Mico Mrkaic

International Monetary Fund (IMF)

Natalija Novta

International Monetary Fund (IMF)

Evgenia Pugacheva

International Monetary Fund (IMF)

Petia B. Topalova

International Monetary Fund (IMF)

Date Written: June 2018

Abstract

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.

Keywords: Climatic changes, External shocks, Climate policy, Production, Low-income developing countries, Climate change, Environoment and growth, Environmental Economics: Government Policy

JEL Classification: E23, O13, Q54, Q56, Q58

Suggested Citation

Acevedo Mejia, Sebastian and Mrkaic, Mico and Novta, Natalija and Pugacheva, Evgenia and Topalova, Petia B., The Effects of Weather Shocks on Economic Activity: What are the Channels of Impact? (June 2018). IMF Working Paper No. 18/144. Available at SSRN: https://ssrn.com/abstract=3221232

Sebastian Acevedo Mejia (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mico Mrkaic

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Natalija Novta

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Evgenia Pugacheva

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Petia B. Topalova

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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