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The Economic Costs of Temperature Uncertainty
Author:
Luca Bettarelli
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,
Davide Furceri https://isni.org/isni/0000000404811396 International Monetary Fund

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Michael Ganslmeier
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Marc Schiffbauer
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Series:
IMF Working Papers
Volume/Issue:
Volume 2025: Issue 026
Language:
English
Publication Date:
24 Jan 2025
DOI:
https://doi.org/10.5089/9798400295119.001
ISBN:
9798400295119
ISSN:
1018-5941
Pages:
59
Keywords:
Temperatures; Temperature Volatility; Uncertainty; Firms.; temperature uncertainty; impact of Temperature volatility; firms' characteristic; temperature data; firms' investment; Climate change; Labor productivity; Natural disasters; Employment; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Beyond its environmental damage, climate change is predicted to produce significant economic costs. Combining novel high-frequency geospatial temperature data from satellites with measures of economic activity for the universe of US listed firms, this article examines a potentially important channel through which global warming can lead to economic costs: temperature uncertainty. The results show that temperature uncertainty—by increasing power outages, reducing labor productivity, and increasing the degree of exposure of firms to environmental and non-political risks, as well as economic uncertainty at the firm-level—persistently reduce firms’ investment and sales. This effect varies across firms, with those characterized by tighter financial constraints being disproportionally more affected.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund