Climate risk and the natural interest rate: An E-DSGE perspective

Paul Levine; Victor Pontines

doi:10.1016/j.econlet.2024.111719

Climate risk and the natural interest rate: An E-DSGE perspective

Paul Levine, Victor Pontines^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

Abstract

We examine the effect of climate-induced temporary extreme weather events on the natural real interest rate by incorporating environmental aspects into a Keynesian growth model. We find that environmental damage accentuates the reduction in the natural real interest rate caused by climate-induced temporary supply disruptions, and this effect is even more pronounced when the estimate of the current stock of carbon dioxide in the atmosphere doubles.

Original language	English
Article number	111719
Number of pages	6
Journal	Economics Letters
Volume	238
DOIs	https://doi.org/10.1016/j.econlet.2024.111719
Publication status	Published - May 2024

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10.1016/j.econlet.2024.111719

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title = "Climate risk and the natural interest rate: An E-DSGE perspective",

abstract = "We examine the effect of climate-induced temporary extreme weather events on the natural real interest rate by incorporating environmental aspects into a Keynesian growth model. We find that environmental damage accentuates the reduction in the natural real interest rate caused by climate-induced temporary supply disruptions, and this effect is even more pronounced when the estimate of the current stock of carbon dioxide in the atmosphere doubles.",

keywords = "Carbon dioxide, Damage function, Environmental damage, Keynesian growth, Natural interest rate",

author = "Paul Levine and Victor Pontines",

note = "Publisher Copyright: {\textcopyright} 2024 Elsevier B.V.",

year = "2024",

month = may,

doi = "10.1016/j.econlet.2024.111719",

language = "English",

volume = "238",

journal = "Economics Letters",

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T1 - Climate risk and the natural interest rate

T2 - An E-DSGE perspective

AU - Levine, Paul

AU - Pontines, Victor

PY - 2024/5

Y1 - 2024/5

N2 - We examine the effect of climate-induced temporary extreme weather events on the natural real interest rate by incorporating environmental aspects into a Keynesian growth model. We find that environmental damage accentuates the reduction in the natural real interest rate caused by climate-induced temporary supply disruptions, and this effect is even more pronounced when the estimate of the current stock of carbon dioxide in the atmosphere doubles.

AB - We examine the effect of climate-induced temporary extreme weather events on the natural real interest rate by incorporating environmental aspects into a Keynesian growth model. We find that environmental damage accentuates the reduction in the natural real interest rate caused by climate-induced temporary supply disruptions, and this effect is even more pronounced when the estimate of the current stock of carbon dioxide in the atmosphere doubles.

KW - Carbon dioxide

KW - Damage function

KW - Environmental damage

KW - Keynesian growth

KW - Natural interest rate

UR - https://www.scopus.com/pages/publications/85190721828

U2 - 10.1016/j.econlet.2024.111719

DO - 10.1016/j.econlet.2024.111719

M3 - Article

SN - 0165-1765

VL - 238

JO - Economics Letters

JF - Economics Letters

M1 - 111719

ER -

Climate risk and the natural interest rate: An E-DSGE perspective

Abstract

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