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Dynamic Effects of Weather Shocks on Production in European Economies

Author

Listed:
  • Daniele Colombo
  • Laurent Ferrara

Abstract

This paper evaluates the dynamic impact of weather shocks on economic activity within the three main European countries. To consolidate meaningful variation in weather patterns, we propose a novel monthly composite weather index (CWI). This index captures relevant information on severe cold and heat conditions, drought, heavy precipitation, and intense wind events. We estimate a series of country-specific Bayesian Structural Vector Autoregressive models to assess the effects of weather shocks on distinct production sectors, namely energy, construction, manufacturing, and services. The findings reveal evidence of a significant impact of weather shocks on economic activity in Europe, with each component of the CWI exerting heterogeneous effects across different countries and production sectors.

Suggested Citation

  • Daniele Colombo & Laurent Ferrara, 2024. "Dynamic Effects of Weather Shocks on Production in European Economies," CAMA Working Papers 2024-07, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2024-07
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2024-01/07_2024_colombo_ferrara.pdf
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    More about this item

    Keywords

    weather shocks; European production; Bayesian SVAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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