Macroeconomic Spillovers of Weather Shocks across U.S. States
43 Pages Posted: 11 Apr 2024 Last revised: 23 May 2024
There are 2 versions of this paper
Macroeconomic Spillovers of Weather Shocks across U.S. States
Macroeconomic Spillovers of Weather Shocks across U.S. States
Date Written: March 8, 2024
Abstract
We estimate the short-run effects of severe weather shocks on local economic activity and cross-border spillovers operating through economic linkages between U.S. states. We measure weather shocks using emergency declarations triggered by natural disasters and estimate their impacts with a monthly Global Vector Autoregressive (GVAR) model for U.S. states. Impulse responses highlight country-wide effects of weather shocks hitting individual regions. Taking into account economic interconnections between states allows capturing much stronger spillovers than those associated with mere spatial adjacency. Also, geographical heterogeneity is critical for assessing country-wide effects of weather shocks, and network effects amplify the local impacts of shocks.
Keywords: Global VAR, natural disasters, spillovers, weather shocks, United States, climate change
JEL Classification: C32, R11, Q51, Q54
Suggested Citation: Suggested Citation