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Macroeconomic impact of weather disasters: a global and sectoral analysis
Weather disasters can inflict macroeconomic damage. The effects on aggregate supply and demand depend on the type of weather disaster and can be temporary or persistent. If and how extreme weather shocks transmit to economic activity and, in turn, inflation are key for monetary policy. If the effect on gross domestic product (GDP) and inflation is temporary and small, monetary policymakers may adopt a ＂look-through＂ approach. By contrast, if a rise in prices triggers higher inflation expectations, monetary policy may need to tighten, or if disasters have a large and persistent negative impact on growth, it may need to loosen.
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