Computing Macro-Effects and Welfare Costs of Temperature Volatility: A Structural Approach
| Autor: | Michael Donadelli, Antonio Paradiso, Marcus Jüppner, Christian Schlag |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
Temperature volatility
media_common.quotation_subject 05 social sciences Economics Econometrics and Finance (miscellaneous) Equity (finance) Monetary economics Settore SECS-P/02 - Politica Economica Asset prices Computer Science Applications Welfare costs Productivity 0502 economics and business Economics Volatility risk 050207 economics Macro Volatility (finance) Empirical evidence Welfare Total factor productivity Structural approach 050205 econometrics media_common |
| Popis: | We produce novel empirical evidence on the relevance of temperature volatility shocks for the dynamics of productivity, macroeconomic aggregates and asset prices. Using two centuries of UK temperature data, we document that the relationship between temperature volatility and the macroeconomy varies over time. First, the sign of the causality from temperature volatility to TFP growth is negative in the post-war period (i.e., 1950–2015) and positive before (i.e., 1800–1950). Second, over the pre-1950 (post-1950) period temperature volatility shocks positively (negatively) affect TFP growth. In the post-1950 period, temperature volatility shocks are also found to undermine equity valuations and other main macroeconomic aggregates. More importantly, temperature volatility shocks are priced in the cross section of returns and command a positive premium. We rationalize these findings within a production economy featuring long-run productivity and temperature volatility risk. In the model temperature volatility shocks generate non-negligible welfare costs. Such costs decrease (increase) when coupled with immediate technology adaptation (capital depreciation). |
| Databáze: | OpenAIRE |
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