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What are the short-to-medium-term effects of extreme weather on the Croatian economy?

Author

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  • Tihana Škrinjarić

    (Hrvatska narodna banka, Hrvatska)

Abstract

This research examines the short-to-medium-term effects of weather changes on the Croatian economy by observing a simple model of an economy that includes changes in extreme weather events. Monthly data from 1999 to 2022 on the growth of the index of industrial production, inflation, energy inflation, changes in the unemployment rate, and selected weather variables is utilized to estimate several Vector Autoregression (VAR) models. The main finding indicates that inflation is mainly affected by weather shocks, especially drought. This means that monetary policy needs to consider this, mainly due to weather extremes being more frequent and of greater magnitudes. Furthermore, the insurance industry could also benefit from such findings due to the first quantification of such results on Croatian data.

Suggested Citation

  • Tihana Škrinjarić, 2023. "What are the short-to-medium-term effects of extreme weather on the Croatian economy?," Working Papers 70, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:wpaper:70
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    climate change; weather effects; extreme weather; inflation.;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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