Discussion paper

DP17909 Climate, Amenities and Banking: El Nino in the US

This paper investigates how a climate shock affects the banking system. Our empirical strategy exploits El Nino, a recurring natural phenomenon producing quasi-random variation in temperatures across the US. We find that El Nino deteriorates the value of natural amenities in the affected counties, reducing house prices and mortgage lending. These local effects aggregate at the bank level and induce exposed banks to change their mortgage lending even in unaffected counties. We identify the characteristics of climate-resilient banks through a LASSO analysis and find that banks with lower operating leverage (expenses on physical premises) are less affected by climate shocks.


De Marco, F and N Limodio (2023), ‘DP17909 Climate, Amenities and Banking: El Nino in the US‘, CEPR Discussion Paper No. 17909. CEPR Press, Paris & London. https://cepr.org/publications/dp17909