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ISSN (online): 1805-9112

Research ArticleOpen access

Climate disasters and annual inflation: International evidence from OECD countries

Ahmed ALHUSEEN1*iD, Osama Abu Zied Nogid EL NOUR2, Ismail ALSAFI3

  1. Department of Ecosystem Functional Analysis of the Landscape, Global Change Research Institute, Academy of Sciences of the Czech Republic, Okružní 517/10, 370 01 České Budějovice Czech Republic
  2. Faculty of Geographical and Environmental Sciences, University of Khartoum, Khartoum, Sudan
  3. Faculty of Education, University of Gadarif, P.O. Box 449, Al Gadarif State, Sudan

* Corresponding author: alhussen.a@czechglobe.cz

Abstract

Climate-related disasters have become increasingly frequent and severe, raising concerns regarding their potential macroeconomic consequences, particularly their influence on inflation dynamics. This study investigates whether climate disasters significantly affect annual consumer price inflation across OECD countries during the period 2000–2024. Using an unbalanced panel dataset comprising 941 country-year observations from 38 OECD economies, the analysis employs a comprehensive panel-data framework, including pooled ordinary least squares, fixed-effects, random-effects, and two-way fixed-effects models with country-clustered robust standard errors. Climate disasters are measured using both occurrence indicators (floods, storms, droughts, extreme temperature events, and wildfires) and disaster severity, represented by the logarithm of reported economic damage. The Hausman specification test supports the use of the fixed-effects estimator, indicating the presence of unobserved country-specific heterogeneity. Across all model specifications, neither aggregate disaster severity nor individual disaster categories exhibit statistically significant effects on annual inflation after controlling for country and year fixed effects. These findings suggest that advanced OECD economies possess sufficient institutional resilience, effective policy responses, and diversified economic structures to mitigate the inflationary consequences of climate-related shocks. The study contributes to the growing literature on climate economics by providing cross-country evidence that the macroeconomic impact of climate disasters on aggregate annual inflation is limited within developed economies. Future research should investigate higher-frequency data, sector-specific price dynamics, and additional macroeconomic controls to further examine the transmission mechanisms linking climate disasters and inflation.

Keywords:Climate disastersInflationOECD countriesPanel dataFixed effectsNatural disastersClimate economics
JEL:C23E31Q54

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