Long-term effects of temperature and precipitation on economic growth of selected MENA region countries

Global climate change results from increasing national efforts of all countries to achieve higher economic growth. These efforts contribute to extravagant phenomena such as sea-level rise, global warming, and decreasing precipitation. The importance of climate change is measured by its impact on economic activities. Some regions, including the Middle East and Northern Africa (MENA), are exposed to more severe climate change. Therefore, the effects of climate change on the economic growth of the MENA region countries are investigated in this study. Thus temperature and precipitation data plus economic growth of 14 MENA countries during 2000–2016 were used here. The Pedroni, Kao, and Westerlund cointegration tests confirmed existence of a long-run equilibrium relationship. This study employed panel data cointegration fully modified ordinary least squares and dynamic ordinary least squares models. The results indicate existence of a cointegrated long-term relationship between climate change and economic growth. The economic growth elasticity to climate change, gross fixed capital formation, population growth, and inflation are consistent with theoretical and empirical research types. Moreover, comparing the elasticity in both applied approaches shows that climate change variables have significant negative effects with the same results for both models. It implies that over the long term one percent increase in temperature and precipitation is associated with a 0.25 and 0.024 percentage decrease in economic growth (under the FMOLS model), respectively. Moreover, a one percent increase in temperature and precipitation over the long term is associated with a 0.28 and 0.005 percent decrease in economic growth (under the DOLS model), respectively.