This study offers a novel examination of the short-term effects of climate shocks on inflation in Indonesia, utilizing a unique regional panel dataset to capture the climatic variances across the country’s vast archipelago. By integrating datasets on disaster, climate patterns, and inflation, the research constructs three types of climate shocks and evaluates their impacts on consumer price inflation using the Local Projections method. The study estimates that climate shocks induce a positive but temporary inflationary response. Specifically, the inflationary pressure persists for one quarter following the disaster shock and two quarters after the El Niño-Southern Oscillation (ENSO) shocks. These findings underscore the challenge of monetary policy under climate change.

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Venue: Weston Theatre, JG Crawford Building, 132 Lennox Crossing, Acton ANU (Crawford School of Public Policy)