Temperature and Growth: a Panel Mixed Frequency VAR Analysis using NUTS2 data

In this study, we contribute to the existing literature on the impact of temperature on growth by examining the orthogonalized seasonal effect jointly with the feedback from economic activity (hence treating the increase in global temperature as anthropogenic) on a sample of 225 EU NUTS2 regions. For this purpose, we use a Panel Mixed- Frequency VAR. The empirical findings show, first, a worsening impact of temperature on growth over the last sub-sample (2000-2019) relative to the full sample analysis (covering the 1981-2019 time span). Moreover, our findings show that seasonal temperature effects are not restricted only to the agriculture sector, and we also find evidence of a heterogeneous impact of seasonal temperature on growth when we turn our focus on hot and cold regions (using the average EU median annual temperature as a threshold), rich and poor regions (using the average EU median income per capita as a threshold) and between competitiveness (using the median Regional Competitiveness index as a threshold).