The Macroeconomic Impact of Droughts in Uruguay: A General Equilibrium Analysis Using the Soil Moisture Deficit Index
IMF Working Papers, January 10, 2025
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- The Macroeconomic Impact of Droughts in Uruguay: A General Equilibrium Analysis Using the Soil Moisture Deficit Index
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Bibliographic details
- Authors: Jean François Clevy, Christopher Evans
- Published: January 10, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400298059.001
Summary findings
- Uruguay experienced a once-in-a-century severe drought that affected key agricultural areas and caused significant direct losses to the agricultural sector, especially for soybean production and cattle farming.
- 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 in Uruguay, combined with its rich climate data, make Uruguay an ideal candidate to study whether weather shocks matter and through which transmission mechanisms.
- Using the empirical and theoretical framework outlined in Gallic and Vermandel (2020), the authors document that weather shocks play an important role in business cycle dynamics in Uruguay.
Methodology and scope
- Analytical approach: General equilibrium analysis using the Soil Moisture Deficit Index and the empirical and theoretical framework from Gallic and Vermandel (2020).
- Subject coverage: Agricultural commodities; Agricultural production; Agricultural sector; Commodities; Economic sectors; Environment; Natural disasters; Production.
- Keywords emphasized in the study: 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.
Key statistics and publication metadata
- Date: January 10, 2025
- Authors: Jean François Clevy; Christopher Evans
- Pages: 47
- Volume: 2025
- Issue: 004
- Series: Working Paper No. 2025/004
- DOI: https://doi.org/10.5089/9798400298059.001
- Stock No: WPIEA2025004
- ISBN: 9798400298059
- ISSN: 1018-5941
Implications and focus for policymakers and researchers
- Weather shocks, as measured through soil moisture deficits, are an important driver of Uruguay’s business cycle dynamics and have direct effects on agricultural output and GDP growth.
- The study underscores the importance of integrating climate shock analysis into macroeconomic modeling for countries with significant agricultural sectors and frequent climate variability.
- The Uruguay case offers a detailed empirical setting to explore transmission mechanisms from weather shocks to macroeconomic outcomes, informing policy design for resilience in agriculture and the broader economy.
IMF Working Paper — The Macroeconomic Impact of Droughts in Uruguay: A General Equilibrium Analysis Using the Soil Moisture Deficit Index (Working Paper No. 2025/004)
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