The SEACEN Centre is pleased to publish its latest Working Paper today, which is “Temperature, precipitation and food price inflation: Evidence from a panel of countries” by Meltem Chadwick from the Centre and Hulya Saygili from Atilim University in Turkey. In the paper, Meltem and Hulya address a significant gap in the existing literature, which is the association between weather variables, i.e., temperature and precipitation, and food price inflation. Using a monthly dataset that spans 23 years for 186 countries, they explore this relationship in detail. Their findings reveal three results. First, weather variables play a crucial role in explaining inflation (with temperature having a negative contemporaneous effect on inflation). Two, precipitation appears to have a positive effect. Three, although the contemporaneous effect is negative, the cumulative inflationary effect of a 1◦C temperature increase can amount to 0.6 percentage points. Overall, the strength of these associations varies across different inflation quantiles. Finally, their results demonstrate the sensitivity to the method of clustering the panel of countries, indicating the importance of methodological considerations in such analyses. Click
here to read.
