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AGRICULTURAL PRICE SHOCKS AND BUSINESS CYCLES: A GLOBAL WARNING FOR ADVANCED ECONOMIES

Jasmien De Winne and Gert Peersman ()

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: For a panel of 75 countries, we find that increases in global agricultural commodity prices that are caused by unfavorable harvest shocks in other regions of the world significantly curtail domestic economic activity. The effects are much larger than for average global agricultural price shifts. The impact is also considerably stronger in high-income countries, despite the lower shares of food in household expenditures these countries have compared to low-income countries. On the other hand, we find weaker effects in countries that are net exporters of agricultural products, have higher shares of agriculture in GDP or lower shares of non-agricultural trade in GDP; that is, characteristics that typically apply to low-income countries. When we control for these country characteristics, we find indeed that the effects on economic activity become smaller when income per capita is higher. Overall, our findings imply that the consequences of climate change on advanced economies are likely larger than previously thought.

Keywords: Agricultural commodity prices; economic activity; climate change (search for similar items in EconPapers)
JEL-codes: E32 F44 O13 O44 Q11 Q54 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2018-04
New Economics Papers: this item is included in nep-agr, nep-env and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:18/945

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