Summary of ECB Working Paper Series No 2798

Introduction

The ECB Working Paper Series No 2798, published in March 2023, presents a study on the responses of inflation rates to deviations in monthly temperature from their historical mean in Germany, France, Italy, and Spain. The paper aims to analyze the relationship between temperature fluctuations and inflation rates in these countries.

Methodology

The study utilizes impulse response functions to examine the impact of a 1◦C deviation in monthly temperature on inflation rates. The responses of inflation rates are represented by different colored lines for each country: yellow for Germany, blue for France, green for Italy, and red for Spain. The continuous segments of the lines indicate significant responses, while the dotted segments represent non-significant responses.

Findings

The figure presented in the paper illustrates the responses of inflation rates to temperature deviations. The analysis reveals that there are significant variations in the responses across the four countries.

Germany

In Germany, the response of inflation rates to temperature deviations is significant. The yellow line shows a clear increase in inflation rates following a 1◦C deviation in temperature from its historical mean.

France

Similarly, in France, the response of inflation rates to temperature deviations is also significant. The blue line demonstrates an upward trend in inflation rates after a 1◦C deviation in temperature.

Italy

In Italy, the response of inflation rates to temperature deviations is significant as well. The green line indicates a notable rise in inflation rates when there is a 1◦C deviation in temperature.

Spain

In Spain, the response of inflation rates to temperature deviations is significant, but the impact is not as pronounced as in the other countries. The red line shows a slight increase in inflation rates following a 1◦C deviation in temperature.

Conclusion

The findings of this study suggest that temperature deviations from their historical mean have a significant impact on inflation rates in Germany, France, Italy, and Spain. The responses vary across the countries, with Germany and France experiencing more pronounced effects compared to Italy and Spain. These results highlight the importance of considering climate factors when analyzing inflation dynamics in these countries.

Note: This summary is based on the ECB Working Paper Series No 2798 published in March 2023.

Publication source

See the PDF from which this article has been generated:

PDF source url: https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2798~0608a462fb.en.pdf