No. 988 - Climate extremes and inflation: evidence from Italian regional data

Questioni di Economia e Finanza (Occasional papers)
by Alessandro Mistretta
December 2025
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Climate extremes - such as severe heat or cold waves, heavy rainfall, droughts, strong winds, and hail - can also affect inflation. This paper assesses the intensity and persistence of these effects in Italy, drawing on region-level data for the period 2000-25.

Cold temperatures push energy prices up, driving inflation higher, whereas mild winters bring it down. Extreme precipitation also tends to lower inflation by boosting hydropower generation, which is less costly than gas-based production. Droughts have no clear influence on prices and other extreme events show limited impact. These effects are generally temporary and tend to dissipate within two years.

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  1. 17 December 2025
    No. 988 - Climate extremes and inflation: evidence from Italian regional data
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