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  5. Estimating Macro-Fiscal Effects of Climate Shocks from Billions of Geospatial Weather Observations

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Estimating Macro-Fiscal Effects of Climate Shocks from Billions of Geospatial Weather Observations

  • Berkay Akyapı
  • Matthieu Bellon
  • Emanuele Massetti
American Economic Journal: Macroeconomics (Forthcoming)

Abstract

The literature studying the macroeconomics of weather has focused on temperature and precipitation annual averages, while micro studies have focused more on extreme weather measures. We construct hundreds of variables from high frequency, high spatial resolution weather measurements. Using the LASSO, we identify the parsimonious subset of variables that can best explain GDP and key macro-fiscal variables. We find that an increase in the occurrence of high temperatures and severe droughts, and scarcer mild temperatures reduce GDP. These variables substantially improve the share of GDP variations explained by weather. Additional evidence suggests that fiscal policy mitigates these shocks.

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