Essays on the macroeconomic impact of weather variability through energy and food markets

Climate variability and its economic implications are at the core of this dissertation. As climate anomalies increasingly disrupt economic activity across the globe, understanding their macroeconomic effects is critical for policymakers, businesses, and researchers. Climate-driven supply and demand shocks affect key economic indicators, including inflation, price volatility, and output fluctuations, often in asymmetric and nonlinear ways. This dissertation examines these relationships through three distinct but interrelated chapters, each focusing on a different dimension of the interaction between climate variability and the macroeconomy. Chapter 1 investigates how temperature anomalies influence energy prices and inflation in the Euro Area. Employing a local projection framework, the analysis accounts for both linear and nonlinear responses to warm and cold spells. The results indicate that warmer temperature anomalies tend to reduce energy demand, exerting moderate deflationary pressure, while colder-than-normal temperatures increase heating needs, leading to persistent inflationary effects. Additionally, the transmission of temperature anomalies to inflation is shown to be influenced by the composition of a country’s energy mix: economies with a higher share of low-carbon energy sources exhibit weaker price responses, while those with more carbon-intensive energy structures experience stronger short-term effects. Chapter 2 examines the effects of weather anomalies and harvest disruptions on global agricultural commodity prices, with a particular focus on the role of inventories in amplifying or dampening price volatility. The chapter introduces a novel global weather shock index that accounts for both the spatial distribution of crop production and the seasonality of agricultural cycles. The empirical results reveal that adverse supply shocks lead to substantial increases in food prices, while the presence of low inventory levels exacerbates the impact of negative shocks. Chapter 3 explores the role of temperature forecast errors in shaping energy price dynamics, particularly in the European gas market. The results demonstrate that shortrange temperature forecast errors serve as a credible measure of exogenous temperature shocks. By distinguishing between expected forecast updates and unexpected temperature surprises, the analysis identifies distinct transmission mechanisms affecting both energy and non-energy sectors. Collectively, the three chapters contribute to the broader literature on climate and the macroeconomy by providing robust empirical evidence on the differential effects of climate anomalies across energy and food markets.