Impact of Climate Change on Inflation in 26 Selected Countries
Abstract
:1. Introduction
2. Literature Review and Hypotheses Creation
2.1. The Concept and Measurement of Climate Change
2.2. Macroeconomic Implications of Climate Change
2.3. Effects of Climate Change on Inflation
2.4. Channels through Which Climate Change Affects Inflation
3. Materials and Methods
3.1. Measurement Model Setting
3.1.1. Baseline Regression Model Setting
3.1.2. Panel Threshold Model Setting
3.1.3. Intermediate Effect Model
3.2. Variable Description
3.2.1. Explanatory Variables
3.2.2. Core Explanatory Variables
3.2.3. Intermediate Variables
3.2.4. Control Variables
3.3. Data and Descriptive Statistics
4. Results
4.1. Baseline Regression Results
4.2. Threshold Effect (Double Threshold)—GDP per Capita
4.3. Mechanism Test
4.4. Robustness Test
4.4.1. Substitution of Explanatory Variables
4.4.2. Adjust the Research Year Interval
4.4.3. Excluded Hyperinflationary Countries
4.4.4. Endogeneity Issues
4.5. Heterogeneity Test
4.5.1. Income Grouping—High-Income and Lower-Middle-Income Country Groupings
4.5.2. Temperature Grouping (High-Temperature Group and Low-Temperature Group)
5. Discussion
6. Conclusions
Author Contributions
Funding
Informed Consent Statement
Conflicts of Interest
References
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Symbol | Variable | Meaning |
---|---|---|
Inflation | Inflation | Inflation, as measured by the Consumer Price Index, reflecting the annual percentage change in the cost of a basket of goods and services purchased by the average consumer |
GDP deflator | GDP deflator annual growth rate | Inflation rate indicating the rate of price change in the economy as a whole |
TEMPworld | Average temperature | Average annual temperature |
STEMP | Average temperature | Standardized mean temperature |
TEMPFAO | Temperature change | Mean surface change temperature over land |
lnUrban | Urbanization rate | Logarithmic value of the share of urban population in the total population |
lnPRE | Precipitation | Average annual precipitation |
lnGDPpercapita | GDP per capita | Logarithm of GDP per capita in constant 2015 dollars |
lnEMP | Unemployment rate | Logarithm of the unemployed population as a percentage of the labor force |
lnM2 | Broad money supply | Logarithmic value of broad money supply |
lnEC | Energy consumption | Total primary energy consumption, primary energy includes raw coal, crude oil, natural gas, hydropower, and nuclear power |
Carbon dioxide emissions | Carbon dioxide emissions are those stemming from the burning of fossil fuels and the manufacture of cement |
Variable | Sample Size | Average | Standard Deviation | Maximum | Minimum |
---|---|---|---|---|---|
Inflation | 702 | 4.75 | 12.03 | 197.41 | −4.48 |
GDPdeflator | 702 | 5.09 | 12.08 | 144.01 | −16.91 |
TEMPworld | 702 | 11.85 | 8.40 | 26.95 | −5.27 |
STEMP | 702 | 0.00 | 1.00 | 1.80 | −2.04 |
TEMPFAO | 702 | 1.10 | 0.60 | 3.69 | −0.79 |
lnUrban | 702 | 4.27 | 0.26 | 4.59 | 3.28 |
lnPRE | 702 | 6.67 | 0.65 | 8.10 | 4.43 |
lnGDPpercapita | 702 | 9.95 | 1.08 | 11.40 | 6.43 |
lnEMP | 702 | 1.84 | 0.46 | 3.26 | 0.53 |
lnM2 | 702 | 13.20 | 1.43 | 17.44 | 9.93 |
lnEC | 702 | 1.83 | 1.22 | 5.06 | −0.74 |
702 | 7.86 | 4.43 | 0.73 | 20.29 |
Variable | (1) | (2) | (3) | (4) |
---|---|---|---|---|
Inflation | Inflation | GDP Deflator | GDP Deflator | |
TEMPworld | 0.948 | 1.894 ** | 1.031 | 1.791 ** |
(0.912) | (0.842) | (0.907) | (0.842) | |
lnUrban | 24.95 ** | 12.99 | ||
(9.683) | (9.686) | |||
lnPRE | −1.922 | −0.976 | ||
(3.232) | (3.233) | |||
lnGDPpercapita | 5.375 | 9.056 ** | ||
(3.951) | (3.952) | |||
lnEMP | −5.951 *** | −6.330 *** | ||
(1.563) | (1.563) | |||
lnM2 | −16.60 *** | −16.45 *** | ||
(1.578) | (1.578) | |||
Constant | 8.761 | 68.01 * | 6.744 | 75.59 ** |
(10.62) | (38.03) | (10.56) | (38.04) | |
National fixed | Yes | Yes | Yes | Yes |
Year fixed | Yes | Yes | Yes | Yes |
Observations | 702 | 702 | 702 | 702 |
0.136 | 0.293 | 0.132 | 0.282 | |
Number of ID | 26 | 26 | 26 | 26 |
Threshold Test | Original Hypothesis | F-Value | p-Value | Threshold | ||
---|---|---|---|---|---|---|
10% | 5% | 1% | ||||
Single Threshold | : No threshold value | 44.490 | 0.026 | 28.973 | 36.088 | 55.259 |
Double Threshold | : A threshold value exists | 113.67 | 0.000 | 12.315 | 15.373 | 21.032 |
Three Thresholds | : Two thresholds exist | 11.240 | 0.680 | 138.243 | 153.626 | 197.605 |
Threshold Variable | Number of Thresholds | Threshold | 95% Confidence Interval |
---|---|---|---|
GDP per capita | Single Threshold | 5618.951 | (4686.859, 6868.704) |
Double Threshold | 6427.308 | (6022.847, 6613.991) |
Variable | Estimated Value |
---|---|
GDP per capita (GDP per capita ≤ 5618.951) | −0.548 (0.665) |
GDP per capita (5618.951 < GDP per capita ≤ 6427.308) | 5.049 (0.001) |
GDP per capita (GDP per capita > 6427.308) | 1.882 (0.225) |
Control variables | Yes |
National fixed | Yes |
Time fixed | Yes |
0.3345 | |
N | 702 |
Variable | (1) Inflation | (2) lnEC | (3) Inflation |
---|---|---|---|
TEMPworld | 1.8941 ** | −0.0295 *** | 2.2413 *** |
(2.2492) | (−2.9630) | (2.6675) | |
lnEC | 11.7676 *** | ||
(3.5636) | |||
lnM2 | −16.6006 *** | 0.1647 *** | −18.5385 *** |
(−10.5199) | (8.8244) | (−11.1965) | |
lnPRE | −1.9215 | −0.0583 | −1.2351 |
(−0.5946) | (−1.5262) | (−0.3849) | |
lnUrban | 24.9546 ** | 0.9791 *** | 13.4335 |
(2.5771) | (8.5496) | (1.3266) | |
lnGDPpercapita | 5.3751 | 0.3496 *** | 1.2608 |
(1.3606) | (7.4835) | (0.3089) | |
lnEMP | −5.9506 *** | 0.0725 *** | −6.8036 *** |
(−3.8084) | (3.9226) | (−4.3421) | |
National fixed | Yes | Yes | Yes |
Year Fixed fixed | Yes | Yes | Yes |
_cons | 68.0125 * | −7.3106 *** | 154.0407 *** |
(1.7886) | (−16.2569) | (3.4419) | |
N | 702 | 702 | 702 |
0.2928 | 0.7036 | 0.3065 |
Type of Effect | Coefficient | Standard Error | 95% Confidence Interval | |
---|---|---|---|---|
Lower Limit | Upper Limit | |||
Indirect_bs_1 | −0.091 *** | 0.035 | −0.159 | −0.022 |
Direct_bs_2 | −0.243 *** | 0.088 | −0.417 | −0.070 |
Variable | (1) Inflation | (2) GDP Deflator | (3) Inflation | (4) GDP Deflator |
---|---|---|---|---|
TEMPFAO | 1.407 * | 1.771 ** | ||
(0.855) | (0.854) | |||
STEMP | 15.90 ** | 15.03 ** | ||
(7.068) | (7.070) | |||
lnUrban | 22.26 ** | 10.36 | 24.95 ** | 12.99 |
(9.640) | (9.627) | (9.683) | (9.686) | |
lnPRE | −2.119 | −1.140 | −1.922 | −0.976 |
(3.236) | (3.231) | (3.232) | (3.233) | |
lnGDPpercapita | 6.323 | 10.21 ** | 5.375 | 9.056 ** |
(3.988) | (3.983) | (3.951) | (3.952) | |
lnEMP | −5.920 *** | −6.248 *** | −5.951 *** | −6.330 *** |
(1.567) | (1.565) | (1.563) | (1.563) | |
lnM2 | −16.79 *** | −16.79 *** | −16.60 *** | −16.45 *** |
(1.604) | (1.602) | (1.578) | (1.578) | |
Constant | 94.31 *** | 99.61 *** | 90.46 ** | 96.81 *** |
(35.88) | (35.83) | (35.89) | (35.90) | |
_cons | 702 | 702 | 702 | 702 |
National fixed | Yes | Yes | Yes | Yes |
Year Fixedfixed | Yes | Yes | Yes | Yes |
0.290 | 0.281 | 0.293 | 0.282 | |
N | 26 | 26 | 26 | 26 |
Variables | (1) | (2) | (4) | (3) |
---|---|---|---|---|
Inflation | GDP Deflator | Inflation | GDP Deflator | |
TEMPworld | 2.360 *** | 2.164 ** | 2.200 ** | 1.891 ** |
(0.874) | (0.880) | (0.896) | (0.772) | |
lnUrban | 27.32 *** | 14.26 | 34.30 *** | 23.06 ** |
(10.31) | (10.37) | (10.60) | (9.126) | |
lnPRE | −2.431 | −1.414 | −2.910 | −2.652 |
(3.392) | (3.414) | (3.468) | (2.987) | |
lnGDPpercapita | 3.750 | 7.696 * | 2.971 | 6.330 * |
(4.170) | (4.197) | (4.295) | (3.699) | |
lnEMP | −5.463 *** | −5.953 *** | −4.617 *** | −4.489 *** |
(1.620) | (1.631) | (1.645) | (1.417) | |
lnM2 | −16.06 *** | −15.92 *** | −16.39 *** | −15.53 *** |
(1.645) | (1.656) | (1.721) | (1.483) | |
Constant | 64.24 | 74.76 * | 49.78 | 54.72 |
(40.20) | (40.46) | (40.88) | (35.21) | |
National fixed | Yes | Yes | Yes | Yes |
Year fixed | Yes | Yes | Yes | Yes |
Observations | 650 | 650 | 598 | 598 |
0.294 | 0.279 | 0.302 | 0.332 | |
Number of ID | 26 | 26 | 26 | 26 |
Variable | (1) | (2) |
---|---|---|
Inflation | GDP Deflator | |
TEMPworld | 0.600 * | 0.933 ** |
(0.339) | (0.465) | |
lnUrban | −8.972 ** | −11.27 ** |
(3.897) | (5.338) | |
lnPRE | −0.981 | −0.479 |
(1.217) | (1.667) | |
lnGDPpercapita | 2.338 | 4.491 ** |
(1.593) | (2.183) | |
lnEMP | −0.972 | −1.113 |
(0.644) | (0.883) | |
lnM2 | −1.024 | −2.737 *** |
(0.757) | (1.038) | |
Constant | 34.79 ** | 37.69 * |
(14.27) | (19.54) | |
National fixed | Yes | Yes |
Year fixed | Yes | Yes |
Observations | 594 | 594 |
0.159 | 0.133 | |
Number of ID | 22 | 22 |
Variable | (1) Inflation | (2) GDP Deflator |
---|---|---|
TEMPworld | 2.078 ** | 2.007 ** |
(0.854) | (0.859) | |
lnUrban | 19.13 ** | 16.27 ** |
(2.78) | (3.13) | |
lnPRE | 0.256 | 0.432 |
(0.80) | (0.66) | |
lnGDPpercapita | −8.524 ** | −6.822 *** |
(−3.10) | (−3.62) | |
lnEMP | −1.014 | −1.294 * |
(−1.61) | (−2.15) | |
lnM2 | −2.002 *** | −2.155 *** |
(−4.41) | (−4.77) | |
Constant | 54.19 *** | 45.66 *** |
(6.38) | (5.36) | |
Kleibergen−Paap rk LM statistic | 17.536 (0.00) | 17.536 (0.00) |
Kleibergen−Paap rk Wald F statistic | 53.778 (0.00) | 53.778 (0.00) |
National fixed | Yes | Yes |
Year fixed | Yes | Yes |
Observations | 702 | 702 |
0.2265 | 0.2818 | |
Number of ID | 26 | 26 |
Variable | High-Income Countries | Low- and Middle-Income Countries | ||
---|---|---|---|---|
(1) Inflation | (2) GDP Eflator | (3) Inflation | (4) GDP Deflator | |
TEMPworld | −0.213 | 0.0699 | 8.903 *** | 7.047 ** |
(0.188) | (0.343) | (3.066) | (3.043) | |
lnUrban | 6.526 * | −2.351 | 100.2 *** | 56.86 * |
(3.669) | (6.684) | (29.84) | (29.62) | |
lnPRE | −0.660 | −0.364 | −4.314 | −0.0287 |
(0.678) | (1.236) | (14.93) | (14.82) | |
lnGDPpercapita | −6.281 *** | −5.548 *** | 15.69 | 31.69 ** |
(1.044) | (1.903) | (13.35) | (13.24) | |
lnEMP | −1.617 *** | −2.067 *** | −19.47 *** | −20.76 *** |
(0.354) | (0.646) | (5.526) | (5.484) | |
lnM2 | −1.752 *** | −3.858 *** | −27.30 *** | −27.66 *** |
(0.459) | (0.837) | (4.301) | (4.268) | |
Constant | 72.30 *** | 125.6 *** | −217.1 | −174.1 |
(22.13) | (40.31) | (132.8) | (131.8) | |
National fixed | Yes | Yes | Yes | Yes |
Year fixed | Yes | Yes | Yes | Yes |
Observations | 513 | 513 | 189 | 189 |
0.342 | 0.189 | 0.613 | 0.592 | |
Number of ID | 19 | 19 | 7 | 7 |
Variable | High-Temperature Group | Low-Temperature Group | ||
---|---|---|---|---|
(1) Inflation | (2) GDP Deflator | (3) Inflation | (4) GDP Deflator | |
TEMPworld | −0.267 | 0.951 | 3.175 *** | 2.125 ** |
(1.368) | (1.754) | (1.224) | (0.925) | |
lnUrban | −49.88 *** | −61.86 *** | 64.39 *** | 50.48 *** |
(13.58) | (17.42) | (14.94) | (11.30) | |
lnPRE | 0.404 | 2.980 | −3.017 | −1.711 |
(3.566) | (4.574) | (6.873) | (5.196) | |
lnGDPpercapita | 8.711 * | 13.07 ** | 1.998 | 1.249 |
(4.726) | (6.062) | (6.872) | (5.195) | |
lnEMP | −9.452 *** | −11.38 *** | −4.818 * | −3.567 * |
(1.861) | (2.387) | (2.603) | (1.968) | |
lnM2 | −17.79 *** | −20.34 *** | −18.76 *** | −14.71 *** |
(1.905) | (2.444) | (2.679) | (2.025) | |
Constant | 382.3 *** | 389.9 *** | −26.75 | −20.58 |
(63.14) | (80.98) | (59.49) | (44.98) | |
Observations | 351 | 351 | 351 | 351 |
0.443 | 0.388 | 0.304 | 0.326 | |
Number of ID | 13 | 13 | 13 | 13 |
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Li, C.; Zhang, X.; He, J. Impact of Climate Change on Inflation in 26 Selected Countries. Sustainability 2023, 15, 13108. https://doi.org/10.3390/su151713108
Li C, Zhang X, He J. Impact of Climate Change on Inflation in 26 Selected Countries. Sustainability. 2023; 15(17):13108. https://doi.org/10.3390/su151713108
Chicago/Turabian StyleLi, Cunpu, Xuetong Zhang, and Jing He. 2023. "Impact of Climate Change on Inflation in 26 Selected Countries" Sustainability 15, no. 17: 13108. https://doi.org/10.3390/su151713108