Weather Shocks and Output in Low-Income Countries: The Role of Policies and Adaptation

35 Pages Posted: 28 Aug 2019

See all articles by Sebastian Acevedo Mejia

Sebastian Acevedo Mejia

International Monetary Fund (IMF)

Claudio Baccianti

Tilburg University - Tilburg University School of Economics and Management

Mico Mrkaic

International Monetary Fund (IMF)

Natalija Novta

International Monetary Fund (IMF)

Evgenia Pugacheva

International Monetary Fund (IMF)

Petia B. Topalova

International Monetary Fund (IMF)

Date Written: August 2019

Abstract

We explore the extent to which macroeconomic policies, structural policies, and institutions can mitigate the negative relationship between temperature shocks and output in countries with warm climates. Empirical evidence and simulations of a dynamic general equilibrium model reveal that good policies can help countries cope with negative weather shocks to some extent. However, none of the adaptive policies we consider can fully eliminate the large aggregate output losses that countries with hot climates experience due to rising temperatures. Only curbing greenhouse gas emissions-which would mitigate further global warming-could limit the adverse macroeconomic consequences of weather shocks in a long-lasting way.

Keywords: Economic policy, Economic growth, Economic recovery, Financial crises, Total factor productivity, Climate change, Climate policy, Adaptation to climate change, Weather shock, structural policy, model simulation, low-income country, p-value, advanced economy

JEL Classification: Q58, E01, L31, O4, E2, O24

Suggested Citation

Acevedo Mejia, Sebastian and Baccianti, Claudio and Mrkaic, Mico and Novta, Natalija and Pugacheva, Evgenia and Topalova, Petia B., Weather Shocks and Output in Low-Income Countries: The Role of Policies and Adaptation (August 2019). IMF Working Paper No. 19/178, Available at SSRN: https://ssrn.com/abstract=3444153

Sebastian Acevedo Mejia (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Claudio Baccianti

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Mico Mrkaic

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Natalija Novta

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Evgenia Pugacheva

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Petia B. Topalova

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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