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The Impact of Weather on Commodity Prices: A Warning for the Future

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  • Marini, Annalisa

Abstract

Drawing on the most recent advances of the panel VAR literature, we apply a framework to investigate the impact of weather on banana export prices towards the United Kingdom. This methodology can address some of the limitations of alternative approaches and it can also be generalized to assess the impact of weather on a variety of commodity markets characterized by a network structure. The results show that (i) while shocks to temperatures affect commodity prices, precipitations are less relevant; (ii) an increase in temperatures is likely to increase prices; (iii) the impact on prices is not only direct but it spills over to other exporting countries; (iv) simulating a scenario compatible with global warming we fi�nd that it is likely to lead to a substantial increase in commodity prices and spillover effects; (v) these effects are ampli�ed if we account for a contemporaneous shock to the economy. We discuss implications for global food security, which can be useful for policy implementation.

Suggested Citation

  • Marini, Annalisa, 2020. "The Impact of Weather on Commodity Prices: A Warning for the Future," MPRA Paper 104572, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104572
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    More about this item

    Keywords

    PVAR; Commodity Price Transmission; Spillovers; Cli- mate Change;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • F1 - International Economics - - Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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