Blog: December 2020
This blog is written by NIESR Fellow Huw Dixon. Any opinions expressed in the paper are those of the author, and do not necessarily reflect the views of the Institute
The CPILW fell slightly from 0.9% in October to 0.7% in November. The CPIH measure of inflation also decreased from 0.9% in October 2020 to 0.6% in November. Both measures indicate a fall in inflation in November.
Global warming is likely to increase the frequency and intensity of extreme or abnormal weather events (Herring et al, 2018, NASEM, 2016). In this note, we quantify the uncertainty of GDP outcomes resulting from abnormal weather events, considering both the initial destruction that is caused by the event as well as the boost to activity from the subsequent rebuild.
We deploy our global macroeconometric model, NiGEM, which specifically allows for spillover effects from one economy to another. Our analysis shows that extreme weather events cause economic volatility and that spillovers magnify the effects of these events. We show that these spillovers are particularly important for small open economies that are densely populated.