IDEAS home Printed from https://ideas.repec.org/p/pre/wpaper/202321.html
   My bibliography  Save this paper

The Predictive Impact of Climate Risk on Total Factor Productivity Growth: 1880-2020

Author

Listed:
  • Desiree M. Kunene

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Renee van Eyden

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Petre Caraiani

    (Institute for Economic Forecasting, Romanian Academy, Romania; Bucharest University of Economic Studies, Romania)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

In this study, we investigate the predictive impact of climate risk (as measured by average temperature changes and temperature realised volatility) on total factor productivity (TFP) growth in 23 economies over the period 1880 to 2020 while controlling for real GDP per capita growth. Standard full-sample Granger causality tests offer little evidence of a causal impact of climate change on productivity outcomes. This may be attributed to nonlinearity and structural breaks in the relationship between climate risk and TFP growth, as evidenced by the BDS (1996) test results for nonlinearity and the Bai-Perron (1998, 2003) multiple breakpoint test results. Furthermore, Rossi-Wang (2019) time-varying VAR-based Granger causality tests, which are robust in the presence of instabilities and structural changes, indicate that for a large number of countries, we observe a significant causal impact of climate change on TFP growth in the post-World War II period, with increased significance in the causal impact for the majority of countries in the post-1980 period.

Suggested Citation

  • Desiree M. Kunene & Renee van Eyden & Petre Caraiani & Rangan Gupta, 2023. "The Predictive Impact of Climate Risk on Total Factor Productivity Growth: 1880-2020," Working Papers 202321, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202321
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    2. Renuka Mahadevan, 2003. "To Measure or Not To Measure Total Factor Productivity Growth?," Oxford Development Studies, Taylor & Francis Journals, vol. 31(3), pages 365-378.
    3. Rossi, Barbara, 2005. "Optimal Tests For Nested Model Selection With Underlying Parameter Instability," Econometric Theory, Cambridge University Press, vol. 21(5), pages 962-990, October.
    4. Zhang, Peng & Deschenes, Olivier & Meng, Kyle & Zhang, Junjie, 2018. "Temperature effects on productivity and factor reallocation: Evidence from a half million chinese manufacturing plants," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 1-17.
    5. Kalaba, Robert E. & Tesfatsion, Leigh S., 1989. "Time-Varying Linear Regression Via Flexible Least Squares," Staff General Research Papers Archive 11196, Iowa State University, Department of Economics.
    6. Edinaldo Tebaldi & Laura Beaudin, 2016. "Climate change and economic growth in Brazil," Applied Economics Letters, Taylor & Francis Journals, vol. 23(5), pages 377-381, March.
    7. Taylor, Lance & Rezai, Armon & Foley, Duncan K., 2016. "An integrated approach to climate change, income distribution, employment, and economic growth," Ecological Economics, Elsevier, vol. 121(C), pages 196-205.
    8. repec:bla:econom:v:53:y:1986:i:210(s):p:s297-312 is not listed on IDEAS
    9. Bruner, Robert F & Simms, John M, Jr, 1987. "The International Debt Crisis and Bank Security Returns in 1982," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 46-55, February.
    10. Michael Donadelli & Marcus Jüppner & Antonio Paradiso & Christian Schlag, 2021. "Computing Macro-Effects and Welfare Costs of Temperature Volatility: A Structural Approach," Computational Economics, Springer;Society for Computational Economics, vol. 58(2), pages 347-394, August.
    11. Barbara Rossi & Yiru Wang, 2019. "Vector autoregressive-based Granger causality test in the presence of instabilities," Stata Journal, StataCorp LLC, vol. 19(4), pages 883-899, December.
    12. Jamie L. Cross & Aubrey Poon, 2020. "On the contribution of international shocks in Australian business cycle fluctuations," Empirical Economics, Springer, vol. 59(6), pages 2613-2637, December.
    13. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2012. "Temperature Shocks and Economic Growth: Evidence from the Last Half Century," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 66-95, July.
    14. James H. Stock & Mark W. Watson, 2001. "Vector Autoregressions," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 101-115, Fall.
    15. Aubrey Poon, 2018. "Assessing the Synchronicity and Nature of Australian State Business Cycles," The Economic Record, The Economic Society of Australia, vol. 94(307), pages 372-390, December.
    16. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    17. Riccardo Colacito & Bridget Hoffmann & Toan Phan, 2016. "Temperature and Growth: A Panel Analysis of the United States," IDB Publications (Working Papers) 94298, Inter-American Development Bank.
    18. D. T. Merrett, 2000. "Business Institutions and Behaviour in Australia: A New Perspective," Business History, Taylor & Francis Journals, vol. 42(3), pages 1-12.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gong, Jiaowei & Shi, Xiangyu & Wang, Chang & Zhang, Xin, 2025. "Extreme high temperatures and adaptation by social dynamics: Theory and evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 234(C).
    2. Akhter Faroque & William Veloce & Jean-Francois Lamarche, 2012. "Have structural changes eliminated the out-of-sample ability of financial variables to forecast real activity after the mid-1980s? Evidence from the Canadian economy," Applied Economics, Taylor & Francis Journals, vol. 44(30), pages 3965-3985, October.
    3. Zhao, Xiaobing, "undated". "The Economic Impact of Temperature Shocks on China and India using Subnational Data," 2018 Annual Meeting, August 5-7, Washington, D.C. 274435, Agricultural and Applied Economics Association.
    4. Nicholas Ngepah & Charles Raoul Tchuinkam Djemo & Charles Shaaba Saba, 2022. "Forecasting the Economic Growth Impacts of Climate Change in South Africa in the 2030 and 2050 Horizons," Sustainability, MDPI, vol. 14(14), pages 1-18, July.
    5. De Juan Fernández, Aránzazu & Poncela, Pilar & Rodríguez Caballero, Carlos Vladimir & Ruiz Ortega, Esther, 2022. "Economic activity and climate change," DES - Working Papers. Statistics and Econometrics. WS 35044, Universidad Carlos III de Madrid. Departamento de Estadística.
    6. Sibande, Xolani & Demirer, Riza & Balcilar, Mehmet & Gupta, Rangan, 2023. "On the pricing effects of bitcoin mining in the fossil fuel market: The case of coal," Resources Policy, Elsevier, vol. 85(PB).
    7. Brady Ryan R & Stimel Derek S, 2011. "How the Housing and Financial Wealth Effects Have Changed over Time," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-45, August.
    8. Rapach, David & Zhou, Guofu, 2013. "Forecasting Stock Returns," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 328-383, Elsevier.
    9. Brady, Ryan R., 2014. "The spatial diffusion of regional housing prices across U.S. states," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 150-166.
    10. Joaquín Bernal-Ramírez & Jair Ojeda-Joya & Camila Agudelo-Rivera & Felipe Clavijo-Ramírez & Carolina Durana-Ángel & Clark Granger-Castaño & Daniel Osorio-Rodríguez & Daniel Parra-Amado & José Pulido &, 2022. "Impacto macroeconómico del cambio climático en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, issue 102, pages 1-62, July.
    11. Matteo Mogliani, 2010. "Residual-based tests for cointegration and multiple deterministic structural breaks: A Monte Carlo study," Working Papers halshs-00564897, HAL.
    12. Mariam Camarero & Juan Sapena & Cecilio Tamarit, 2020. "Modelling Time-Varying Parameters in Panel Data State-Space Frameworks: An Application to the Feldstein–Horioka Puzzle," Computational Economics, Springer;Society for Computational Economics, vol. 56(1), pages 87-114, June.
    13. Bernard, Jean-Thomas & Idoudi, Nadhem & Khalaf, Lynda & Yelou, Clement, 2007. "Finite sample multivariate structural change tests with application to energy demand models," Journal of Econometrics, Elsevier, vol. 141(2), pages 1219-1244, December.
    14. Su, Tong & Lin, Boqiang, 2024. "Reassessing the information transmission and pricing influence of Shanghai crude oil futures: A time-varying perspective," Energy Economics, Elsevier, vol. 140(C).
    15. Kevin S. Nell & Maria M. De Mello, 2019. "The interdependence between the saving rate and technology across regimes: evidence from South Africa," Empirical Economics, Springer, vol. 56(1), pages 269-300, January.
    16. Geoffrey Ngene & Kenneth A. Tah & Ali F. Darrat, 2017. "Long memory or structural breaks: Some evidence for African stock markets," Review of Financial Economics, John Wiley & Sons, vol. 34(1), pages 61-73, September.
    17. Parma Chakravartti & Sudipto Mundle, 2017. "An Automatic Leading Indicator Based Growth Forecast For 2016-17 and The Outlook Beyond," Working Papers id:11773, eSocialSciences.
    18. Meng Xu & Avishai Ceder & Ziyou Gao & Wei Guan, 2010. "Mass transit systems of Beijing: governance evolution and analysis," Transportation, Springer, vol. 37(5), pages 709-729, September.
    19. Stephen G Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2005. "Assessing the Sources of Changes in the Volatility of Real Growth," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & David Norman (ed.),The Changing Nature of the Business Cycle, Reserve Bank of Australia.
    20. Martin Henseler & Ingmar Schumacher, 2019. "The impact of weather on economic growth and its production factors," Climatic Change, Springer, vol. 154(3), pages 417-433, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:202321. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rangan Gupta (email available below). General contact details of provider: https://edirc.repec.org/data/decupza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.