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The Macroeconomic Effects of Climate Policy Uncertainty

Author

Listed:
  • Konstantinos Gavriilidis
  • Diego R. Känzig
  • Ramya Raghavan
  • James H. Stock

Abstract

We develop a novel measure of climate policy uncertainty based on newspaper coverage. Our index spikes during key U.S. climate policy events—including presidential announcements on international agreements, congressional debates, and regulatory disputes—and shows a recent upward trend. Using an instrument for plausibly exogenous uncertainty shifts, we find that higher climate policy uncertainty decreases output and emissions while raising commodity and consumer prices, acting as supply rather than demand shocks. Faced with this trade-off, monetary policy does not accommodate climate policy uncertainty shocks, shaping their transmission. Firm-level analyses show stronger declines in investment and R&D when firms have higher climate change exposure.

Suggested Citation

  • Konstantinos Gavriilidis & Diego R. Känzig & Ramya Raghavan & James H. Stock, 2026. "The Macroeconomic Effects of Climate Policy Uncertainty," NBER Working Papers 34762, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34762
    Note: EEE EFG
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    More about this item

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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