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International Comparison of Climate Change News Index with an Application to Monetary Policy

Author

Listed:
  • Takuji Fueki

    (Hitotsubashi University (E-mail: takuji.fueki@r.hit-u.ac.jp))

  • Takeshi Shinohara

    (Deputy Director and Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: takeshi.shinohara@boj.or.jp))

  • Mototsugu Shintani

    (The University of Tokyo (E-mail: shintani@e.u-tokyo.ac.jp))

Abstract

We construct a Climate Change News (CCN) index which measures attention to climate change risk for Japan, based on text information from newspaper articles. We compare our index with the original WSJ Climate Change News index of Engle et al. (2020) for the U.S. (WSJ-CCN index), as well as other measures of macroeconomic uncertainty. We find that the correlation between the CCN indexes of the U.S. and Japan is much higher than the correlation between the CCN index and other uncertainty measures in either of those countries. We also find that shocks to the CCN indexes have significantly negative effects on economic sentiment, but have ambiguous effects on industrial production. This contrasts with the fact that, for both the U.S. and Japan, other uncertainty shocks have negative effects on both economic sentiment and industrial production. As an application of the CCN indexes, we investigate if the effectiveness of monetary policy depends on the degree of attention to climate change risks.

Suggested Citation

  • Takuji Fueki & Takeshi Shinohara & Mototsugu Shintani, 2024. "International Comparison of Climate Change News Index with an Application to Monetary Policy," IMES Discussion Paper Series 24-E-03, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:24-e-03
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    More about this item

    Keywords

    Climate Change; Text Analysis; Monetary Policy; Nonlinear Local Projection;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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