Title: The impact of climate on economic and financial cycles: A Markov-switching panel approach
Authors: Monica Billio - University of Venice (Italy)
Roberto Casarin - University Ca' Foscari of Venice (Italy)
Ayokunle Anthony Osuntuyi - University Ca' Foscari of Venice (Italy) [presenting]
Malcolm Mistry - University of Venice (Italy)
Enrica De Cian - University of Venice (Italy)
Abstract: The impact of climate shocks on 13 eurozone economies in different phases of business and financial cycle is examined. A Bayesian Panel Markov-switching framework is proposed to jointly estimate the impact of extreme weather events on the economies as well as the interaction between business and financial cycles. Results from the empirical exercise suggest that extreme weather events impact asymmetrically across the different phases of the economy and heterogeneously across the EU countries. A further empirical study indicates that the manufacturing output, a component of the industrial production index, constitutes the main channel through which climate shocks impacts the EU economies.