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Economic Brief

Aug. 31, 2021

Richmond Fed Research Examines Economic Impact of Climate-Related Shocks

Some argue that direct economic damages from climate-related shocks are not big enough to have a notable impact on the economy. However, this argument misses an important lesson from the Great Recession: amplifications in the financial markets. In the 2007–09 recession, reactions in the financial markets substantially amplified the initial losses directly related to household default of subprime mortgages. The Richmond Fed’s latest Economic Brief discusses evidence of similar amplification of direct climate damages. For instance, climate-related disasters like hurricanes and flooding can cause housing prices to drop even in the absence of direct hurricane or flood damages

The Richmond Fed’s Economic Brief series provides essays on economic issues and trends. Sign up to receive an email notification when a new essay is posted


As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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