Systemic risks caused by worldwide simultaneous bad and good harvest in agricultural market and trade under future climate change: stochastic simulation by th e computable general equilibrium model

Yoji Kunimitsu and Gen Sakurai

No 333228, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Extreme fluctuations of food prices in the global market, caused by the global synchronized production shocks due to climate change, may decrease the stability of food supply source portfolio through agricultural trade, like systemic risks in financial markets. This study aims to quantify the degree of systemic risk in the agricultural markets under future climate change and evaluate the effects of trade liberalization when systemic risk exists. Simulation analysis, using computable general equilibrium (CGE) model based on harvest predictions from crop model and global climate model (GCM), suggests the following. (1) In rice, which has the largest synergistic effect of output fluctuation, the output synergy was significant in combinations of trading countries with more than 40%. (2) This synchronicity of yields increases fluctuations in agricultural production and agricultural price by 22% and 84%, respectively. (3) Although trade liberalization can alleviate the vulnerability of agricultural production under climate change, in countries with large imports of agricultural products, such mitigation effect on price fluctuation by trade liberalization declines due to systemic risk. Therefore, by taking into accounts the systemic risk under future climate change, it is necessary to examine the true effects of agricultural trade policies and prepare countermeasures in advance.

Keywords: Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333228

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