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Temperature and quarterly economic activity: panel data evidence from Mexico

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  • Jesús Arellano-González
  • Miriam Juárez-Torres

Abstract

In this paper, we estimate the effect of temperature on the economic activity of Mexico using 42 years of quarterly panel data on economic growth at the state level. Our findings reveal a concave relationship between quarterly economic growth and quarterly average temperature that is maximized at around 20 degrees Celsius. Average temperatures above this level are associated with lower economic growth rates with sharper declines for agricultural and low-income states. Temperature affects aggregate economic growth mainly through the effect it has on the growth of the primary and secondary sectors. The findings of this paper suggest that by 2100, in the absence of adaptation and under an intermediate scenario of climate change, global warming might cause a statistically significant reduction of quarterly economic growth.

Suggested Citation

  • Jesús Arellano-González & Miriam Juárez-Torres, 2025. "Temperature and quarterly economic activity: panel data evidence from Mexico," Working Papers 2025-02, Banco de México.
    • Handle: RePEc:bdm:wpaper:2025-02
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    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7B57F7C396-8203-53D5-1B18-E920DED5F609%7D.pdf
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    Keywords

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    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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