The E-axes Forum on Climate Change, Macroeconomics, and Finance

Miles Parker

“Feeling the heat: extreme temperatures and price stability”

Event description

Donata Faccia, Miles Parker, and Livio Stracca, in their paper investigate how extreme temperatures affect medium-term inflation, the primary objective of monetary policy.

From the abstract: “Using panel local projections for 48 advanced and emerging market economies (EMEs), we study the impact of country-specific temperature shocks on a range of prices: consumer prices, including the food and non-food components, producer prices and the GDP deflator. Hot summers increase food price inflation in the near term, especially in EMEs. But over the medium term, the impact across the various price indices tends to be either insignificant or negative. Such effect is largely non-linear, being more significant for larger shocks and at higher absolute temperatures. We also provide simulations from a two-country model to understand the rationale behind the results. Overall, our results suggest that temperature plays a non-negligible role in driving medium-term price developments. Climate change matters for price stability.”

Moderator:

Pierre Monnin
Senior Fellow, CEP

Miles Parker

Miles Parker is a Senior Lead Economist in Directorate General Economics at the European Central Bank. Prior to joining the ECB, he was Adviser at the Reserve Bank of New Zealand and Senior Economist at the Bank of England. He has a PhD in Economics from Te Herenga Waka / Victoria University of Wellington. His research focuses on inflation and the economic impact of climate; on occasion, both together.

Paper and slides

"Feeling the heat: extreme temperatures and price stability" (Paper)

"Feeling the heat: extreme temperatures and price stability" (Slides)

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