This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2026
  4. Program
  5. Climate Change and Climate Disasters: Macro Effects and Policies
« Back to Results

Climate Change and Climate Disasters: Macro Effects and Policies

Paper Session

Saturday, Jan. 3, 2026 10:15 AM - 12:15 PM (EST)

Philadelphia Convention Center, 204-A
Hosted By: American Economic Association
  • Chair: Alessandro Cantelmo, Bank of Italy

Is the Green Transition Inflationary?

Marco Del Negro
,
Federal Reserve Bank of New York
Julian di Giovanni
,
Federal Reserve Bank of New York
Keshav Dogra
,
Federal Reserve Bank of NewYork

Abstract

We develop a multi-sector New Keynesian model to analyze the inflationary effects of climate policies. Climate policies need not be inflationary, but can generate an inflation-output tradeoff whose size depends on the relative flexibility of "dirty" sectors prices vis-a-vis the rest of the economy. A version of the model calibrated to U.S. input-output data and sectoral heterogeneity in emissions and price stickiness matches the empirical responses to an energy shock of various CPI indexes well. It suggests that carbon taxes would have sizable inflationary implications if accommodated, while containing their impact on inflation would lead to a prolonged contraction.

The Macroeconomic Effects of Climate Policy Uncertainty

Diego Känzig
,
Northwestern University
Konstantinos Gavriilidis
,
University of Stirling
Ramya Raghavan
,
Northwestern University
James H. Stock
,
Harvard University

Abstract

We develop a novel measure of climate policy uncertainty based on newspaper coverage. Our index spikes during key U.S. climate policy events—including presidential announcements on international agreements, congressional debates, and regulatory disputes—and shows a recent upward trend. Using an instrument for plausibly exogenous uncertainty shifts, we find that higher climate policy uncertainty decreases output and emissions while raising commodity and consumer prices, acting as supply rather than demand shocks. Monetary policy counteracts these inflationary pressures, affecting the transmission of climate policy uncertainty. Firm-level analyses show stronger declines in investment and R&D when firms have higher climate change exposure.

How Much Will Global Warming Cool Global Growth?

Ishan Nath
,
Federal Reserve Bank of San Francisco
Valerie A. Ramey
,
Hoover Institution
Peter J. Klenow
,
Stanford University

Abstract

Does a permanent rise in temperature decrease the level or growth rate of GDP in affected countries? Differing answers to this question lead prominent estimates of climate damages to diverge by an order of magnitude. This paper combines indirect evidence on economic growth with new empirical estimates of the dynamic effects of temperature on GDP to argue that warming has persistent, but not permanent, effects on growth. We start by presenting a range of evidence that technology flows tether country growth rates together, preventing temperature changes from causing country-specific growth rates to diverge permanently. We then use data from a panel of countries to show that temperature shocks have large and persistent effects on GDP, driven in part by persistence in temperature itself. These estimates imply projected future global losses of 8-13% of GDP from unabated warming, which is at least three to six times larger than level effect estimates and 25-70% smaller than permanent growth effect estimates, with larger discrepancies for initially hot and cold countries.

Natural Disasters and Central Bank Asset Purchases

Alessandro Cantelmo
,
Bank of Italy
Alessandro Lin
,
Bank of Italy
Francesco Zanetti
,
University of Oxford

Abstract

We evaluate the effectiveness of central bank asset purchases (APs) in mitigating the effects of risk and the materialization of natural disasters on the distributions of inflation and the output gap. We document a sharp increase in term premia following natural disaster strikes thus justifying the central bank’s intervention via APs. Building on NGFS climate change scenarios, we show that APs are needed to significantly sustain economic activity and contribute to achieving the central bank’s inflation target unless further cliamte mitigation policies are implemented.
JEL Classifications
  • E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
  • E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook