MNI BRIEF: Extreme Heat Impact On Price Levels 'Signficant'

Extreme temperatures have a significant and meaningful impact on consumer and producer prices and the GDP deflator, new research published by the ECB Wednesday argues, with hot summers having the most notable near-term impact via food prices, particularly in emerging market economies. Over the medium term, negative demand effects may lead to falling prices and depressed economic activity.

“Our findings point to the presence of a non-linear impact of global warming on prices, with the impact more significant for larger shocks and for higher absolute temperatures. In the context of rising temperatures, that means countries that have to date been spared economic impacts in the past may not be so fortunate in the future,” the working paper concludes.