According to current regulation, European banks can apply zero risk weights to sovereign exposures in their balance sheet, irrespective of the assigned rating. We show that a zero risk weighting of sovereign bonds has implications by distorting banks' asset allocation decisions. Due to the lower...

We shed new light on the macroeconomic effects of rising temperatures. In the data, a shock to global temperature dampens expenditures in research and development (R&D). We rationalize this empirical evidence within a stochastic endogenous growth model, featuring temperature risk and growth...

Energy efficiency improvements are a key component on the road towards a carbonneutral economy. We identify the development of energy efficiency in the data and show that in recent decades it has increased at the aggregate level. At the sectoral level, however, the development in energy...

This paper examines the welfare implications of rising temperatures. Using a standard VAR, we empirically show that a temperature shock has a sizable, negative and statistically significant impact on TFP, output, and labor productivity. We rationalize these findings within a production economy...