ESTIMATING CATASTROPHIC LOSS IN KENYAN AGRICULTURE

Mercy Kireum

No 260800, 2016 Conference, August 25-26, Nelson, New Zealand from New Zealand Agricultural and Resource Economics Society

Abstract: Agriculture is a sector that is sensitive to climate variability and extreme weather conditions such as droughts and floods. The occurrence of these events is predicted to increase in frequency and intensity due to climate change. These events have adverse effects on agriculture especially rain-fed agriculture which is significantly exposed to weather leading to food insecurity for millions of people. As a result, it is necessary to determine approaches that ensure better estimation and management of resources needed given the occurrence of these extreme weather events. This is important for better financial risk management and consequently enhancing sustainable growth of the agricultural sector. In this study, we explore the application of Value at Risk (VaR) method in estimating financial loss as a result of drought. Agricultural loss as a result of rainfall variability and drought is calculated. Extreme Value Theory (EVT) is used to model the distribution of the agricultural loss. The VaR method is used to determine the catastrophic risk. Future actions will be proposed with a view enhancing financial risk management in the agricultural sector. This has the potential to enhance resilience to disasters.

Keywords: Agricultural and Food Policy; Agricultural Finance; Community/Rural/Urban Development; Crop Production/Industries; Environmental Economics and Policy (search for similar items in EconPapers)
Date: 2016-08-25
New Economics Papers: this item is included in nep-agr, nep-env and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nzar16:260800

DOI: 10.22004/ag.econ.260800

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