The effect of climate-related risks on forecasts and expectations

The COVID19 Pandemic teaches us the hard lesson that
global crises require timely and effective government
policies. Although the Pandemic was hardly predictable
and, therefore, countermeasures lag, it is unquestionable
that we are on the verge of a climate crisis which requires a
higher level of prevention and mitigation strategies. One of
the major economic research challenges is how to deal with
climate-related risks, that is how to assess, price and
incorporate such risks in macro-finance models (Giglio,
Kelly and Strobel,2020). Focusing on physical risks
(earthquakes, flooding, etc.), I am interested in studying
the effect of climate-related risks on monetary and fiscal
stability. First, I plan to study if and how forecasters
incorporate these risks in predicting a series of
macroeconomics and financial variables (such as GDP
growth, inflation, etc.). This is a relevant research question
because forecasters' opinions are central in how firms and
households update their beliefs and expectations (Carroll,
2003), which in turns are important for central banks to
assess the effectiveness of monetary policies.
Consequently, I will investigate how households modify
their consumption and financial behaviors in response to
forecasters' predictions and experienced environmental
shocks. I hope that my study will provide meaningful
insights on the fight to climate change, the most
predominant challenge of our time.