{
  "title": "How Persistent are Climate-Related Price Shocks? Implications for Monetary Policy",
  "publication": "IMF Working Papers, October 28, 2022",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2022/10/28/how-persistent-are-climate-related-price-shocks-implications-for-monetary-policy-525048",
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  "summary": "Climate change is likely to lead to more frequent and more severe supply and demand shocks that will present a challenge to monetary policy formulation.",
  "sections": [
    {
      "heading": "Research objective and methodology",
      "content": "- Main objective: investigate how climate shocks affect consumer prices in a broad range of countries over a long period.\n- Method: local projection methods.\n- Scope: broad range of countries over a long period (as stated in the source)."
    },
    {
      "heading": "Key empirical findings",
      "content": "- The impact of climate shocks on inflation depends on the type and intensity of shocks, country income level, and monetary policy regime.\n- Droughts tend to have the highest overall positive impact on inflation, reflecting rising food prices.\n- Floods tend to have a dampening impact on inflation, pointing to the predominance of demand shocks in this case.\n- Over the long run, the dominant monetary policy paradigm of flexible inflation targeting faced with supply-induced climate shocks may become increasingly ineffective, especially in LIDCs.\n- More research is needed to find viable alternative monetary policy frameworks."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Monetary policy frameworks should account for heterogeneous effects of different climate shock types (e.g., droughts versus floods).\n- The potential diminishing effectiveness of flexible inflation targeting in the presence of supply-induced climate shocks, particularly in LIDCs, implies a need to explore alternative monetary policy frameworks.\n- Additional research is required to identify and evaluate viable alternative monetary policy frameworks that can better address climate-related supply and demand shocks."
    },
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      "heading": "Publication metadata and key statistics",
      "content": "- Authors: Alain N. Kabundi, Montfort Mlachila, Jiaxiong Yao\n- Date: October 28, 2022\n- Series: Working Paper No. 2022/207\n- Issue: 207\n- Volume: 2022\n- Pages: 50\n- DOI: https://doi.org/10.5089/9798400223556.001\n- ISBN: 9798400223556\n- ISSN: 1018-5941\n- Stock No: WPIEA2022207\n\nIMF Working Papers — \"How Persistent are Climate-Related Price Shocks? Implications for Monetary Policy\" (October 28, 2022) by Alain N. Kabundi, Montfort Mlachila, Jiaxiong Yao.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2022/10/28/how-persistent-are-climate-related-price-shocks-implications-for-monetary-policy-525048"
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    "Authors: Alain N. Kabundi, Montfort Mlachila, Jiaxiong Yao",
    "Published: October 28, 2022",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400223556.001",
    "Main objective: investigate how climate shocks affect consumer prices in a broad range of countries over a long period.",
    "Method: local projection methods.",
    "Scope: broad range of countries over a long period (as stated in the source).",
    "The impact of climate shocks on inflation depends on the type and intensity of shocks, country income level, and monetary policy regime.",
    "Droughts tend to have the highest overall positive impact on inflation, reflecting rising food prices.",
    "Floods tend to have a dampening impact on inflation, pointing to the predominance of demand shocks in this case.",
    "Over the long run, the dominant monetary policy paradigm of flexible inflation targeting faced with supply-induced climate shocks may become increasingly ineffective, especially in LIDCs.",
    "More research is needed to find viable alternative monetary policy frameworks.",
    "Monetary policy frameworks should account for heterogeneous effects of different climate shock types (e.g., droughts versus floods).",
    "The potential diminishing effectiveness of flexible inflation targeting in the presence of supply-induced climate shocks, particularly in LIDCs, implies a need to explore alternative monetary policy frameworks.",
    "Additional research is required to identify and evaluate viable alternative monetary policy frameworks that can better address climate-related supply and demand shocks.",
    "Authors: Alain N. Kabundi, Montfort Mlachila, Jiaxiong Yao",
    "Date: October 28, 2022",
    "Series: Working Paper No. 2022/207",
    "Issue: 207",
    "Volume: 2022",
    "Pages: 50",
    "DOI: https://doi.org/10.5089/9798400223556.001",
    "ISBN: 9798400223556",
    "ISSN: 1018-5941",
    "Stock No: WPIEA2022207",
    "**Working Paper**"
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