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Report
Do Mortgage Lenders Respond to Flood Risk?
Blickle, Kristian S.; Perry, Evan; Santos, João A. C. (2024-05-01)
Using unique nationwide property-level mortgage, flood risk, and flood map data, we analyze whether lenders respond to flood risk that is not captured in FEMA flood maps. We find that lenders are less willing to originate mortgages and charge higher rates for lower LTV loans that face “un-mapped” flood risk. This effect is weaker for high income applicants, as well as non-banks and small local banks. However, we find evidence that non-banks and local banks are more likely to securitize/sell mortgages to borrowers prone to flood risk. Taken together, our results are indicative that ...
Staff Reports , Paper 1101

Report
800,000 Years of Climate Risk
Adrian, Tobias; Boyarchenko, Nina; Giannone, Domenico; Prasad, Ananthakrishnan; Seneviratne, Dulani; Xiao, Yanzhe (2022-09-01)
We use a long history of global temperature and atmospheric carbon dioxide (CO2) concentration to estimate the conditional joint evolution of temperature and CO2 at a millennial frequency. We document three basic facts. First, the temperature–CO2 dynamics are non-linear, so that large deviations in either temperature or CO2 concentrations take a long time to correct–on the scale of multiple millennia. Second, the joint dynamics of temperature and CO2 concentrations exhibit multimodality around historical turning points in temperature and concentration cycles, so that prior to the start of ...
Staff Reports , Paper 1031

Speech
A Microprudential Perspective on the Financial Risks of Climate Change
Stiroh, Kevin J. (2020-11-10)
Remarks at the 2020 Climate Risk Symposium, Global Association of Risk Professionals (delivered via videoconference).
Speech

Working Paper
Unequal Climate Policy in an Unequal World
Belfiori, Elisa; Carroll, Daniel R.; Hur, Sewon (2024-07-16)
We study climate policy in an economy with heterogeneous households, two types of goods (clean and dirty), and a climate externality from the dirty good. Using household expenditure and emissions data, we document that low-income households have higher emissions per dollar spent than high-income households, making a carbon tax regressive. We build a model that captures this fact and study climate policies that are neutral with respect to the income distribution. A central feature of these policies is that resource transfers across consumers are ruled out. We show that the constrained optimal ...
Globalization Institute Working Papers , Paper 427

Working Paper
The Local Economic Impact of Natural Disasters
Wilson, Daniel J.; Roth Tran, Brigitte (2020-11-06)
We use county panel data to study the dynamic responses of local economies after naturaldisasters in the U.S. Specifically, we estimate disaster impulse response functions for personalincome per capita and a broad range of other economic outcomes, using a panel version of thelocal projections estimator. In contrast to some recent cross-country studies, we find thatdisasters increase total and per capita personal income over the longer-run (as of 8 years out).The effect is driven initially largely by a temporary employment boost and in the longer run byan increase in average weekly wages. We ...
Working Paper Series , Paper 2020-34

Working Paper
Climate-related Financial Stability Risks for the United States: Methods and Applications
Brunetti, Celso; Caramichael, John; Crosignani, Matteo; Dennis, Benjamin; Kotta, Gurubala; Morgan, Donald P.; Shin, Chaehee; Zer, Ilknur (2022-07-05)
This report has two objectives: 1. Review the available literature on Climate-Related Financial Stability Risks (CRFSRs) as it pertains to the United States. Specifically, the literature review considers several modeling approaches and aims to 1.1 Identify financial market vulnerabilities (e.g., bank leverage), 1.2 Provide an assessment of those vulnerabilities (high/medium/low) as identified by the current literature, and 1.3 Evaluate the uncertainty surrounding these assessments based on interpretation of the findings and coverage of existing literature (high/low). 2. Identify methodologies ...
Finance and Economics Discussion Series , Paper 2022-043

Journal Article
Climate Change and the Economy
Wells, Matthew (2022-01)
Richmond Fed senior economist Toan Phan has spent the past decade exploring the economics of climate change. His research in this area began as he was finishing graduate school in 2012, when he was struck by the potential economic implications of climate-related disasters like flooding and hurricanes. So, along with colleagues Riccardo Colacito of the University of North Carolina and Bridget Hoffmann of the Inter-American Development Bank, he began a project to understand the relationship between increasing temperatures and economic growth. The resulting article, "Temperature and Growth: A ...
Econ Focus , Issue 1Q , Pages 12

Briefing
How Does Market Competition Affect Banks' Adaptation to Changes in Flood Risks?
Phan, Toan (2024-02)
This article examines the interplay between market competition and banks' strategic responses to projected long-term changes in flood risks, using data from the home-equity credit market post-Hurricane Harvey. Our work reveals that banks updated their risk models based on exposure to the hurricane, with those in competitive markets less likely to adopt cautious lending practices. It also explores the concept of strategic complementarity, showing that banks' adaptive behaviors are influenced by their competitors. These findings shed insights on how market forces may influence the way banks ...
Richmond Fed Economic Brief , Volume 24 , Issue 06

Working Paper
A Macro Study of the Unequal Effects of Climate Change
Fried, Stephie (2024-05-24)
This paper develops a macro heterogeneous-agent model to quantify the distributional impacts of higher temperatures in the US. Households adapt to temperature by using energy and equipment for heating and cooling. A key insight is that temperature acts as a transfer from nature, augmenting household income by the value of heating or cooling provided by nature. The welfare effects of climate change vary substantially with income, increasing welfare inequality in the colder parts of the US. This heterogeneity results from the effects of climate change on transfers from nature and on ...
Working Paper Series , Paper 2024-18

Working Paper
Climate Change and the Geography of the U.S. Economy
Leduc, Sylvain; Wilson, Daniel J. (2023-07-13)
This paper examines how the spatial distribution of people and jobs in the United States has been and will be impacted by climate change. Using novel county-level weather data from 1951 to 2020, we estimate the longer-run effects of weather on local population, employment, wages, and house prices using a panel distributed lag model. The historical results point to long-lasting negative effects of extreme temperatures on each of these outcomes. We highlight that a long lag structure is necessary to appropriately capture the longer-run effects of climate change, as short-run effects are often ...
Working Paper Series , Paper 2023-17

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