Laurent Ferrara

This paper evaluates the dynamic impact of weather shocks on economic activity within the three main European countries. To consolidate meaningful variation in weather patterns, we propose a novel monthly composite weather index (CWI). This index captures relevant information on severe cold and heat conditions, drought, heavy precipitation, and intense wind events. We estimate a series of country-specific Bayesian Structural Vector Autoregressive models to assess the effects of weather shocks on distinct production sectors, namely energy, construction, manufacturing, and services. The findings reveal evidence of a significant impact of weather shocks on economic activity in Europe, with each component of the CWI exerting heterogeneous effects across.