Climate Change and The Brazilian Economic Cycle

This paper investigates the impact of climate change on the Brazilian economic cycle. Using a small-scale Dynamic Stochastic General Equilibrium (DSGE) model, the study incorporates climate variables to analyze the effects of climate variations on macroeconomic and fiscal variables. This study evaluates climate change and its possible increase in the weight of the climate-related parameter. It is not a study on climate shocks because the climate data are within the Phillips curve, in which there is an inflation shock, and it cannot be said that this shock is derived solely from climate. The results highlight the sensitivity of economic variables to climate fluctuations and suggest that monetary and fiscal policies should consider these impacts to mitigate risks and promote economic stability. The model simulations reveal how climate change can affect price stability, highlighting the need for proactive and adaptive policy management in the face of changes.