This is a data science project about climate change as a risk of shocks causing financial “distress” in households. The project is motivated by evidence presented in Dobridge (2018, Journal of Money, Credit, and Banking). This paper shows that, in the wake of extreme weather events, households engage in consumption smoothing, but their ability to do so depends on their access to pay-day lending.
This evidence suggests that climate change should be seen as (among other things) a process changing the risk (and magnitude) of “liquidity” shocks affecting consumption. Evidence for this view of climate change also appears in a recent working paper of Baumgartner et al. (2022). While this paper concerns a special setting in Austria (Austrian ski tourism), the CONFILIENCE project seeks to identify effects of weather shocks in the entire German economy.