NEW WORKING PAPER with Asjad Naqvi: Temperature shocks transmit unevenly across consumer prices, with adjustment extending into services and unfolding over several months. This paper combines gridded ERA5-Land temperature data with 17 Harmonised Indices of Consumer Prices in 34 European countries over 2000–2025. Monthly local projections trace price-level responses to country-specific maximum-temperature anomalies over 24 months. Headline prices and services respond gradually, reaching 0.157% and 0.122% at month 20 for a one-country-standard-deviation shock. Larger late-horizon responses appear in alcoholic beverages, tobacco, and narcotics and in personal care, social protection, and miscellaneous goods and services. Several delayed positive responses persist across seven lag-history specifications. The patterns are consistent with temperature-induced supply pressures transmitted through sectors with heterogeneous price adjustment. These findings connect the supply effects of temperature to the literature on sectoral price rigidity and inform the assessment of climate-related inflation risks.
Please note that this paper will be updated in the future months. So please refer to the latest version if you want to quote it.
You are welcome to download, share, or comment on the following working paper:
- Naqvi, A., & Saadaoui, J. (6 November 2026). Temperature Anomalies and Sectoral Inflation in Europe.