Friday, December 03, 2010

Weather and the macroeconomy

Given the lousy weather and the lousy macroeconomy prevailing in Ireland it is natural to wonder do adverse weather shocks have an impact on economic activity? One's intuition is that bad weather is bad for the economy though clearly there will be silver linings to the cloud for some, manufacturers and purveyors of galoshes for example. For a non-technical discussion of why weather does matter see Niemara (2005).
In an historical analysis Solomou & Wu (2002) "considers the influence of weather shocks at a disaggregated level of analysis, modelling the effects of weather shocks on British agriculture, construction and energy demand over the period 1870–1913. The impact of weather shocks will vary from sector to sector as the conditions favouring one activity may be adverse to another. The sectoral effects are aggregated to give us an estimate of the macroeconomic effects of weather on business cycle fluctuations"

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