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Introduction to weather extremes and monetary policy

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  • Pablo Garcia Sanchez

Abstract

I begin this note by reviewing the economic effects of past weather shocks. I explore the empirical literature and present three case studies: the fall of the Roman Empire, the French Revolution of 1848, and Kansas in the 1880s. The second part of the note discusses how more frequent and severe weather extremes could risk price stability, and offers some thoughts on the modelling of weather shocks, a crucial step in designing good monetary policy. My main message is this: even in wealthy economies, weather events will affect central banks’ ability to achieve their primary goal - keeping prices in check.

Suggested Citation

  • Pablo Garcia Sanchez, 2022. "Introduction to weather extremes and monetary policy," BCL working papers 163, Central Bank of Luxembourg.
  • Handle: RePEc:bcl:bclwop:bclwp163
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    File URL: https://www.bcl.lu/en/publications/Working-papers/163/BCLWP163.pdf
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    More about this item

    Keywords

    Extreme Weather Events; Climate Change;

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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