Macroeconomic Effects of Climate Change in an Aging World
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Summary:
Climate and demographic changes are two major long-term trends that are evolving simultaneously. The global population is aging, while climate change is increasing the frequency and severity of weather-related disasters and lowering productivity. This paper examines the macroeconomic effects of these three changes in a common framework. Simulation results suggest that while aging drags down the real interest rate, climate change puts upward pressure on the real interest rate and inflation. As climate change intensifies, it will be the dominant factor shaping the macroeconomic variables. This results in higher inflation and a higher debt-to-GDP ratio, requiring tighter fiscal and monetary policies. The results further suggest that economic uncertainty induced by climate change amplifies these effects of climate change.
Series:
Working Paper No. 2022/258
Subject:
Aging Climate change Consumption Demographic change Environment Financial services National accounts Population and demographics Real interest rates
Frequency:
regular
English
Publication Date:
December 16, 2022
ISBN/ISSN:
9798400226397/1018-5941
Stock No:
WPIEA2022258
Pages:
51
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