Big news: Climate-disaster expectations and the business cycle

Alexander M. Dietrich; Gernot J. Müller; Raphael S. Schoenle

doi:10.1016/j.jebo.2024.106719

Big news: Climate-disaster expectations and the business cycle

Alexander M. Dietrich, Gernot J. Müller Raphael S. Schoenle

Journal of economic behavior & organization, Vol.227, p.106719

11/2024

: https://doi.org/10.1016/j.jebo.2024.106719

Business cycle

Climate change

Disasters

Expectations

Monetary policy

Natural rate of interest

Survey

News—anticipated changes of an economy’s fundamentals—drive the business cycle. Climate change is big news: it will impact the economy profoundly, but its full effect will take time to materialize. To better understand the transmission of news, this paper focuses on climate-change expectations. First, we measure the expected economic impact of climate change in a representative survey of U.S. consumers. We find, in particular, that costly natural disasters are salient of climate change. Second, we calibrate a New Keynesian model with rare disasters to the survey results and find that shifts in climate-change expectations operate like adverse demand shocks.

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url

https://doi.org/10.1016/j.jebo.2024.106719

Published (Version of record)

: Big news: Climate-disaster expectations and the business cycle
: Alexander M. Dietrich - Danmarks Nationalbank
Gernot J. Müller - University of Tübingen
Raphael S. Schoenle - CEPR, UK
: Journal of economic behavior & organization, Vol.227, p.106719
: Elsevier B.V
: 9924393078001921
: Brandeis International Business School; Department of Economics
: English
: Journal article