No. 1541 - Heat, cold and the macroeconomy: temperature shocks are not all alike

Temi di discussione (Working papers)
by Filippo Natoli
July 2026
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The paper assesses whether heatwaves and cold spells have similar consequences for the economy. To this end, it constructs new measures of unexpected temperature shocks for the United States, based on daily county-level data over the period 1975–2019. These indicators allow the macroeconomic effects of heat episodes to be distinguished from those associated with cold events, by measuring their impact on economic activity, prices, consumption and macroeconomic uncertainty.

There is a strong asymmetry between the effects of unexpected cold and heat shocks. Cold shocks increase uncertainty and reduce economic activity, consumption, investment, prices and interest rates. Heat shocks, in contrast, have no significant aggregate effects in the short run. The results highlight that extreme cold events can be a significant source of economic risk at a time of increasing climatic instability.

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  1. 30 July 2026
    No. 1541 - Heat, cold and the macroeconomy: temperature shocks are not all alike
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