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Vulnerability to Climate Change: Evidence from a Dynamic Factor Model

Author

Listed:
  • Haroon Mumtaz

    (Queen Mary University)

  • Fulvia Marotta

    (University of Oxford)

Abstract

Using a dynamic factor model with stochastic volatility, we examine the synchronization of temperature and precipitation changes across countries and regions. By doing so, we analyze the implications for the medium-term economic outlook and vulnerability to climate risks. Our findings reveal that a common factor explains a significant portion of temperature variance globally, with the largest contribution observed in sub-Saharan Africa, Latin America, and Asia. Additionally, the com-mon factor accounts for the increase in temperature levels across these regions. In contrast, precipitation fluctuations exhibit more localized patterns. We find that countries with higher GDP per-capita tend to have lower exposure to global temperature changes.

Suggested Citation

  • Haroon Mumtaz & Fulvia Marotta, 2023. "Vulnerability to Climate Change: Evidence from a Dynamic Factor Model," Working Papers 961, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:961
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    References listed on IDEAS

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    Cited by:

    1. Matteo Barigozzi & Marc Hallin, 2023. "Dynamic Factor Models: a Genealogy," Papers 2310.17278, arXiv.org, revised Jan 2024.

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    Keywords

    Climate change; Temperatures; Economic vulnerability; Dynamic factor model.;
    All these keywords.

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