Economic Effects of Solar Activity: Evidence from Canada

This papers uses a three-sector Real Business Cycle model with a stochastic sunspot volatility shock to estimate the adverse effects of intense solar activity to the economy of Canada. To the best of my knowledge this is the first study to measure the adverse effects of intense solar activity in Canada. Calibrating the model for Canada\u27s economy, I found that a solar activity shock leads to lower output, consumption, and investment. These findings are confirmed from an econometric exercise using Canadian data. Precisely, this paper finds that every percentage point increase in solar activity generates a 0.26 percentage point decrease in real GDP per capita