Vulnerability to Climate Change: Evidence from a Dynamic Factor Model

Haroon Mumtaz and Fulvia Marotta
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Haroon Mumtaz: Queen Mary University
Fulvia Marotta: University of Oxford

No 961, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Using a dynamic factor model with stochastic volatility, we examine the synchronization of temperature and precipitation changes across countries and regions. By doing so, we analyze the implications for the medium-term economic outlook and vulnerability to climate risks. Our findings reveal that a common factor explains a significant portion of temperature variance globally, with the largest contribution observed in sub-Saharan Africa, Latin America, and Asia. Additionally, the com-mon factor accounts for the increase in temperature levels across these regions. In contrast, precipitation fluctuations exhibit more localized patterns. We find that countries with higher GDP per-capita tend to have lower exposure to global temperature changes.

Keywords: Climate change; Temperatures; Economic vulnerability; Dynamic factor model. (search for similar items in EconPapers)
Date: 2023-07-19
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:961

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