The Dynamic Effects of Weather Shocks on Agricultural Production

The new version of our article The Dynamic Effects of Weather Shocks on Agricultural Production co-authored with Cédric Crofils and Gauthier Vermandel is available on HAL : https://hal.science/halshs-04443037.

Our article investigates the dynamic effects of weather shocks on monthly agricultural production in Peru, using a Local Projection framework. The findings provide a nuanced understanding of how adverse weather conditions, measured by excess heat or rain, impact agricultural production, with implications for inflation and aggregate production.

In this new version, we rewrote the introduction, we simplified the estimation procedure, we included more regions in the dataset, we added details on the econometric tools, and we added many robustness checks.

Abstract

This paper investigates the dynamic effects of weather shocks on monthly agricultural production in Peru, using a Local Projection framework. An adverse weather shock, measured by an excess of heat or rain, always generates a delayed negative downturn in agricultural production. The magnitude and duration of this downturn depend on several factors, including the type of crop and the timing of the shock. On average, a weather shock—a temperature shock—can cause a monthly decline of 5% to 15% in agricultural production. The response exhibit important heterogeneity across time, crop, and season dimensions, with hysteresis suggesting farmers’ adaptation over time. At the macroeconomic level, weather shocks are recessionary and entail a decline in inflation, agricultural production, exports, exchange rate and GDP.

A replication ebook is available on my website: codes (ebook)

The corresponding R codes are available on GitHub: GitHub

Agricultural production response to a weather shock.