Title: Unusual weather in unusual economic times
Authors: Florian Huber - University of Salzburg (Austria)
Tamas Krisztin - IIASA (Austria)
M. Marcellino - Bocconi University (Italy)
Leopold Ringwald - International Institute for Applied System Analysis (IIASA) (Austria) [presenting]
Abstract: The impacts of extreme weather anomalies on the US macroeconomy are studied by allowing for non-linearities and quantile-specific impacts. The Actuaries Climate Index identifies extreme outliers in weather patterns, which tracks changes in extreme temperatures, heavy rainfall, drought, high wind, and sea level. The approach allows us to estimate these impacts conditional on the $pth$ quantile in the response. This way, we can distinguish the effect of weather shocks on different states of the macroeconomy. We use Bayesian Markov chain Monte Carlo (MCMC) methods for estimation and structural inference with our quantile factor VAR model (QF-BART). Our results indicate a significant negative response over time of weather shocks on industrial production after 1990. Moreover, the initial impact on the lowest and highest percentile differs in magnitude and sign.