The Unassuming Economist

From a paper by Luca Bettarelli, Davide Furceri, Loredana Pisano, Pietro Pizzuto:

“This paper investigates the impact of climate change policies on inflation, for a large sample of 177 developed and developing economies, 78 subnational territorial areas and 17 sectors, over the period 1989-2022. We show that carbon taxes lead to inflationary pressures. The effect is not negligible: a one standard deviation carbon tax shock—corresponding to a 5$/tCO2 increase in emissions-weighted carbon taxes—leads to an increase of the price level of about 0.7 percent one year after the implementation of the policy, and between 1.6 and 4 percent in the medium term. These results hold at the national, sub-national and sectoral level. The effect is larger when inflation is initially high, and in regions (sectors) characterized by high emissions and low innovation capacity. In contrast, we find that emissions trading systems as well as non-market-based climate change policies (such as R&D subsidies) do not have statistically significant effects on prices.”

From a paper by Xiaoke Zhu, and Xiaohua Yu:

“This study aims to investigate whether and how food inflation influences U.S. macroeconomic dynamics. To this end, we develop and estimate a heterogeneous dynamic stochastic general equilibrium (DSGE) model incorporating both the food and non-food sectors. Calibration and Bayesian estimation methods are employed to derive the key parameters involved in this model. Our analysis reveals that key macroeconomic variables exhibit significant nonlinear responses to food price shocks. Notably, a quarter of headline inflation can be attributed to food inflation in the post-pandemic era. Furthermore, a higher labor substitution parameter and lower consumption substitution elasticity amplify the economic recession. In response to food price shocks, moderate monetary policies can mitigate declines in real GDP and consumption but potentially exacerbate inflation.”

From a paper by Shuang Wang, Yan Wang, and Jing Li:

“Crude oil is a critical resource for modern industrialized societies and is heavily affected by geopolitical factors. However, existing studies on oil security assessment often overlook the interdependence among evaluation indicators and dimensions, leading to biased estimations. Furthermore, few studies have examined the varying impacts of geopolitical risks on oil security, ignoring potential heterogeneous impacts. To address these gaps, we propose a novel analytical framework. First, we introduce an innovative approach to evaluate oil security using a refined multi-level nested copula, which captures the dependence structure among indicators and dimensions. Second, we employ copula functions to explore how geopolitical risks affect a nation’s oil security and uncover their transmission channels. Empirical analysis using data from China shows that geopolitical risks significantly weaken oil security, with a symmetric tail dependence between them, indicating consistent effects regardless of geopolitical fluctuations. Moreover, we identify diminishing supply security as the primary pathway through which geopolitical risks impact oil security. These findings offer valuable policy insights for strengthening energy security amidst geopolitical uncertainties.”

From a paper by by Luca Bettarelli, Davide Furceri, Michael Ganslmeier, Marc Tobias Schiffbauer:

“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.”

From a paper by Nafeesa Yunus:

“This study examines the impact of aggregate oil shocks and disentangled oil shocks on U.S. and seven major securitized real estate markets. Oil is integrated with the markets and leads them over the long-run. The short-run impact of oil shocks on the markets is negative. A disentangled analysis of oil shocks reveals that supply and demand shocks have differential impacts. Over the long-run, supply shocks have little impact, while demand shocks contribute significantly to common trends and lead each market. In the short-run, demand shocks have positive effects on each market, whereas supply shocks have negative but lesser effects.”