The Macroeconomic Effects of Unexpected Temperature Shocks

36 Pages Posted: 21 Jul 2022 Last revised: 12 Apr 2024

Multiple version iconThere are 2 versions of this paper

Date Written: April 11, 2024


Whether temperature swings affect economic activity at the business cycle frequency is still an open issue. I show that unexpected temperature extremes at the local level may translate into negative macroeconomic shocks. Using daily data since 1970, I construct county-level heat and cold shocks that measure the surprise effect of unusually hot and cold days in each month and use them to compute monthly series of US-wide shocks. Two new results emerge. First, cold shocks reduce output, while heat shocks have no impact. Second, cold shocks are deflationary, suggesting a demand-side transmission with implications for the conduct of monetary policy. These findings rest on the proposed identification of unexpected shocks, whose key assumptions are compared with those implicit in other analyses in the literature by constructing alternative versions of the shocks. Economically, this paper highlights the risks related to unexpected coldwaves, that the economy is less prepared to face in the global warming era.

Keywords: temperature shocks, business cycle, climate change, monetary policy

JEL Classification: C32, E32, E52, Q54

Suggested Citation

Natoli, Filippo, The Macroeconomic Effects of Unexpected Temperature Shocks (April 11, 2024). Available at SSRN: or

Filippo Natoli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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