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Welfare†at†Risk and Extreme Dependency of Regional Wheat Yields: Implications of a Stochastic CGE Model

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  • Gözde Erhan Ãœnal
  • Baris Karapinar
  • Tetsuji Tanaka

Abstract

Stochastic computable general equilibrium (CGE) models have ignored regional correlations in agricultural yields, assuming random shocks to be independent between regions. This could lead to misinterpretation of simulation outputs which ignore extreme positive or negative harvests at the global scale. We develop a multi†regional CGE model which allows for five types of interregional correlation between wheat yields to analyse the vulnerability of countries against fluctuating international markets, focusing on Value at Risk (VaR) and extreme dependency. We find that global welfare risks could be underestimated by up to 33% if significant interregional correlations in yield shocks are not taken into account. Egypt, Kazakhstan, Ukraine, the former Soviet Union and Northern Africa are particularly vulnerable to global volatilities in terms of economic welfare.

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  • Gözde Erhan Ãœnal & Baris Karapinar & Tetsuji Tanaka, 2018. "Welfare†at†Risk and Extreme Dependency of Regional Wheat Yields: Implications of a Stochastic CGE Model," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(1), pages 18-34, February.
    • Handle: RePEc:bla:jageco:v:69:y:2018:i:1:p:18-34
    DOI: 10.1111/1477-9552.12229
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    Cited by:

    1. Sergio René Araujo‐Enciso & Thomas Fellmann, 2020. "Yield Variability and Harvest Failures in Russia, Ukraine and Kazakhstan and Their Possible Impact on Food Security in the Middle East and North Africa," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(2), pages 493-516, June.
    2. Tetsuji Tanaka & Jin Guo & Naruto Hiyama & Baris Karapinar, 2022. "Optimality Between Time of Estimation and Reliability of Model Results in the Monte Carlo Method: A Case for a CGE Model," Computational Economics, Springer;Society for Computational Economics, vol. 59(1), pages 151-176, January.
    3. Luyuan Xu & Wei Wang, 2021. "A Quantitative Relationship Analysis of Industry Shifts and Trade Restructuring in ASEAN Based on Multiregional Computable General Equilibrium Models," Complexity, Hindawi, vol. 2021, pages 1-12, February.
    4. Jin Guo & Tetsuji Tanaka, 2020. "Dynamic Transmissions and Volatility Spillovers between Global Price and U.S. Producer Price in Agricultural Markets," JRFM, MDPI, vol. 13(4), pages 1-20, April.

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