Climate-related disasters have the potential to negatively affect economic growth, escalate inflation influencing the conditions prevailing the definition of interest rates by central banks. To understand the extent to which climate change is projected to alter macroeconomic indicators, the CVM provides country-level results on its effects.
The economic data explorer presents results on three key macroeconomic indicators: Gross Domestic Product per capita growth (GDP), inflation (change in consumer price index, CPI) and interest rates.
For the deviations in GDP per capita growth and inflation from climate change, the method applied is from Baarsch et al., 2020. The econometric approach relates historical climate-related disasters to change in macroeconomic indicators. Thanks to the concept of analogues, the historically estimated effects are used to project future risks using data from climate models in three timeframes and two scenarios.
The analysis on interest rates relies on the Taylor rule (Taylor, 1993) that relates changes in inflation and GDP to changes in interest rates. Central banks in low- to high-income countries - implicitly or explicitly - apply this rule to their definition.
With the provided data, users can have access to country-level indicators essential to economic, financial and development decision-making.