Assessing the macroeconomic impact of weather shocks in Colombia

José Romero, Sara Naranjo-Saldarriaga and Jonathan Alexander Munoz
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Sara Naranjo-Saldarriaga: Banco de la Republica
Jonathan Alexander Munoz: Banco de la Republica

No 14-2023, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: In this paper, we investigate the impact of adverse weather shocks on Colombian economic activity, with a particular emphasis on the effects on agricultural output, food and headline inflation. Existing literature and empirical evidence suggest that adverse weather shocks, such as those related to the El Nino event in 2015-2016, lead to decreases in agricultural output and increases in inflation without significantly affecting total GDP growth. To further assess this result, we evaluate the impact of ENSO fluctuations using a BVAR-X model. Based on these findings, we propose a small open economy New Keynesian model that introduces a novel channel through which relative prices (agricultural vs. non-agricultural) are affected by weather shocks, allowing us to incorporate this empirical evidence into a structural model for Colombia.

Keywords: Weather shocks; El Nino Southern Oscillation (ENSO); Small Open Economy New Keynesian Models (search for similar items in EconPapers)
JEL-codes: E31 E52 Q54 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2023-09-14
New Economics Papers: this item is included in nep-agr, nep-dev, nep-dge, nep-env, nep-ger and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp14-2023

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