Events at CERGE-EI

Hee Soo Kim, M.S.

Indiana University Bloomington, United States

Abstract: This paper presents new empirical evidence on short- and medium-term heterogeneous temperature effects on real GDP growth and inflation at the US state level. The results reveal heterogeneity across states, seasons, and time horizons, with the sign of responses becoming synchronized seven quarters after temperature shocks. By examining the joint responses of output and prices, I explore whether temperature shocks resemble demand or supply shock at the state-level. The nature of shock varies by sea-son and time horizon: cold season shock initially acts as positive demand and supply shock but transitions to negative supply (mostly in north-eastern states) and positive demand shock (mostly in southern states) as the time horizon extends, whereas warm season shock predominantly resembles negative supply shock after seven quarters (especially in southern states). Variations in state-level responses are explained by state attributes such as sectoral shares of manufacturing and services along with average temperature.

Full Text: Heterogeneity in the Economic Impact of Temperature Shocks Across US States