Hanging Out to Dry? Long-term Macroeconomic Effects of Drought in Fragile and Conflict-Affected States

May 24, 2024

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Kalin I Tintchev, and Laura Jaramillo. Hanging Out to Dry? Long-term Macroeconomic Effects of Drought in Fragile and Conflict-Affected States, (USA: International Monetary Fund, 2024) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using a comprehensive drought measure and a panel autoregressive distributed lag model, the paper finds that worsening drought conditions can result in long-term scarring of real GDP per capita growth and affect long-term price stability in Fragile and Conflict-Affected States (FCS), more so than in other countries, leaving them further behind. Lower crop productivity and slower investment are key channels through which drought impacts economic growth in FCS. In a high emissions scenario, drought conditions will cut 0.4 percentage points of FCS’ growth of real GDP per capita every year over the next 40 years and increase average inflation by 2 percentage points. Drought will also increase hunger in FCS, from alreay high levels. The confluence of lower food production and higher prices in a high emissions scenario would push 50 million more people in FCS into hunger. The macroeconomic effects of drought in FCS countries are amplified by their low copying capacity due to high public debt, low social spending, insufficient trade openness, high water insecurity, and weak governance.

Subject: Climate change, Environment, Food production, Natural disasters, Production, Productivity

Keywords: Climate change, Climate policy, Drought condition, Drought measure, FCS country, FCS group specification, FCS' growth, Food production, Global, Long-term growth and inflation, Natural disasters, Productivity, Sub-Saharan Africa

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/106
Stock No:

WPIEA2024106
ISBN:

9798400277221
ISSN:

1018-5941

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