Does climate and economic uncertainties influence inflation? Evidence from a comparative study between US and Euro Area

This paper examines the impact of uncertainty on inflation components in the Euro area and the United States. Using a Structural Vector Autoregression (SVAR) model, the analysis focuses on the effects of climate risk and economic policy uncertainty on headline, core, food, and energy inflation. The results indicate significant but region-specific influences: in the United States, climate-related uncertainty has emerged as a key driver of price fluctuations, particularly in the post-COVID-19 period, while in the Euro area, economic policy uncertainty remains the predominant inflationary force. These findings highlight the importance of coordinated fiscal and monetary strategies when inflationary pressures stem from diverse sources of uncertainty.