Working Paper: CEPR ID: DP15866
Authors: Alexander Dietrich; Gernot Müller; Raphael Schoenle
Abstract: We measure expectations about the short-run economic impact of climate change in a representative survey of US consumers. Respondents expect not much of an impact on GDP growth, but perceive a high probability of costly, rare disasters---suggesting they are salient of climate change. Furthermore, expectations vary systematically with socioeconomic characteristics, media consumption, various information treatments and over time. We calibrate a New Keynesian model to key results of the survey and spell out two implications for monetary policy. First, climate-change related disaster expectations lower the natural rate of interest substantially. Second, time-variation in disaster expectations contributes to cyclical fluctuations.
Keywords: climate change; disasters; households; expectations; survey; media focus; monetary policy; natural rate of interest; paradox of communication
JEL Codes: E43; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| time variation in disaster expectations (H84) | cyclical fluctuations in the economy (E32) |
| climate change-related disaster expectations (Q54) | natural rate of interest (E43) |
| climate change-related disaster expectations (Q54) | current economic activity (E20) |
| disaster expectations (H84) | monetary policy effectiveness (E52) |
| shifts in disaster expectations (H84) | demand shocks (E39) |
| disaster expectations (H84) | business cycle fluctuations (E32) |
| disaster expectations (H84) | consumption (E21) |
| disaster expectations (H84) | CPI (E31) |
| disaster expectations (H84) | unemployment (J64) |