IMF Working Papers

The Macroeconomic Impact of Droughts in Uruguay: A General Equilibrium Analysis Using the Soil Moisture Deficit Index

By Jean François Clevy, Christopher Evans

January 10, 2025

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Format: Chicago

Jean François Clevy, and Christopher Evans. "The Macroeconomic Impact of Droughts in Uruguay: A General Equilibrium Analysis Using the Soil Moisture Deficit Index", IMF Working Papers 2025, 004 (2025), accessed April 9, 2025, https://doi.org/10.5089/9798400298059.001

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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

Uruguay recently confronted the impact of a once-in-a-century severe drought, which affected key agricultural areas, and caused significant direct losses to the agricultural sector, especially for soybean production and cattle farming - important exports in Uruguay's trade matrix. From October 2022 to April 2023, rainfall was about 47 percent below historical averages, contributing to a decline in agricultural output and impacting overall GDP growth. The frequency of recent climate shocks witnessed in Uruguay combined with its rich climate data make it the ideal candidate to understand if weather shocks matter and through which transmission mechanisms. Using the empirical and theoretical framework outlined in Gallic and Vermandel (2020) we document that weather shocks play an important role in business cycle dynamics in Uruguay.

Subject: Agricultural commodities, Agricultural production, Agricultural sector, Commodities, Economic sectors, Environment, Natural disasters, Production

Keywords: Agricultural commodities, Agricultural production, Agricultural sector, Business cycles, General equilibrium analysis, Global, Impact of drought, Natural disasters, Soil moisture deficit index, Standard deviation, Uruguay, Weather shock, Weather shocks

Publication Details

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