The Economic Value of Seasonal Forecasts Stochastic Economywide Analysis for East Africa

32 Pages Posted: 12 Aug 2016

See all articles by Joao Rodrigues

Joao Rodrigues

International Food Policy Research Institute (IFPRI)

James Thurlow

International Food Policy Research Institute (IFPRI)

Willem Landman

University of Pretoria

Claudia Ringler

International Food Policy Research Institute (IFPRI)

Ricky Robertson

International Food Policy Research Institute (IFPRI)

Tingju Zhu

International Food Policy Research Institute (IFPRI)

Date Written: August 5, 2016

Abstract

There is growing interest within the climate change and development community in using seasonal forecast information to reduce the losses to agriculture resulting from climate variability, especially within food-insecure countries. However, forecast systems are expensive to establish and maintain, and therefore gauging the potential economic return to investments in forecast systems is crucial. Most studies that evaluate seasonal forecasts focus on developed countries and/or overlook agriculture’s economywide linkages. Yet forecasts may be more valuable in developing regions such as East Africa, where climate is variable and agriculture has macroeconomic importance. We use computable general equilibrium and process-based crop models to estimate the potential economywide value of national seasonal forecast systems in Kenya, Malawi, Mozambique, Tanzania, and Zambia. Stochastic seasonal simulations produce value distributions for forecasts of varying accuracy and varying levels of farm coverage. A timely and accurate forecast adopted by all farmers generates average regional income gains of US$113 million per year. Gains are much higher during extreme climate events and are generally pro-poor. The forecast value falls when forecast skill and farm coverage decline. National economic and trading structures, including the importance of agricultural exports, are found to be major determinants of forecast value. Economywide approaches are therefore needed to complement farm-level analysis when evaluating forecast systems in low-income agrarian economies.

Keywords: East Africa; Africa South of Sahara; Africa; forecasting; climate change; modeling; economic value; mathematical models; general equilibrium; seasonal forecasts; stochastic modeling

JEL Classification: D58; Q54; Q15

Suggested Citation

Rodrigues, Joao and Thurlow, James and Landman, Willem and Ringler, Claudia and Robertson, Ricky and Zhu, Tingju, The Economic Value of Seasonal Forecasts Stochastic Economywide Analysis for East Africa (August 5, 2016). IFPRI Discussion Paper 1546, Available at SSRN: https://ssrn.com/abstract=2820148

Joao Rodrigues (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States

James Thurlow

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Willem Landman

University of Pretoria ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

Claudia Ringler

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Ricky Robertson

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Tingju Zhu

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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