Ewen Gallic () and
Gauthier Vermandel ()
No 1915, AMSE Working Papers from Aix-Marseille School of Economics, France
How much do weather shocks matter? The literature addresses this question in two isolated ways: either by looking at long-term effects through the prism of theoretical models, or by focusing on short-term effects using empirical analysis. We propose a framework to bring together both the short and long-term effects through the lens of an estimated DSGE model with a weather-dependent agricultural sector. The model is estimated using Bayesian methods and quarterly data for New Zealand using the weather as an observable variable. In the short-run, our analysis underlines the key role of weather as a driver of business cycles over the sample period. An adverse weather shock generates a recession, boosts the non-agricultural sector and entails a domestic currency depreciation. Taking a long-term perspective, a welfare analysis reveals that weather shocks are not a free lunch: the welfare cost of weather is currently estimated at 0.19% of permanent consumption. Climate change critically increases the variability of key macroeconomic variables (such as GDP, agricultural output or the real exchange rate) resulting in a higher welfare cost peaking to 0.29% in the worst case scenario.
Keywords: agriculture; business cycles; climate change; weather shocks (search for similar items in EconPapers)
JEL-codes: C13 E32 Q54 (search for similar items in EconPapers)
Pages: 63 pages
New Economics Papers: this item is included in nep-agr, nep-bec, nep-dge, nep-env and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
https://www.amse-aixmarseille.fr/sites/default/fil ... /wp_2019_-_nr_15.pdf (application/pdf)
Journal Article: Weather shocks (2020)
Working Paper: Weather Shocks (2020)
Working Paper: Weather Shocks (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1915
Access Statistics for this paper
More papers in AMSE Working Papers from Aix-Marseille School of Economics, France AMU-AMSE - 5-9 Boulevard Maurice Bourdet, CS 50498 - 13205 Marseille Cedex 1. Contact information at EDIRC.
Bibliographic data for series maintained by Gregory Cornu ().