{
  "title": "QPM-Based Analysis of Weather Shocks and Monetary Policy in Developing Countries",
  "publication": "IMF Working Papers, May 23, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824",
  "overlayPath": "/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824/index.md",
  "summary": "Weather-related shocks are of a supply-side nature and therefore present significant challenges for monetary policy. Using a Quarterly Projection Model (QPM) framework, this paper provides an overview of weather-relevant analytical exercises that help to understand the propagation channels of these",
  "sections": [
    {
      "heading": "Overview and central findings",
      "content": "- Weather-related shocks are of a supply-side nature and therefore present significant challenges for monetary policy.\n- Using a Quarterly Projection Model (QPM) framework, the paper provides an overview of weather-relevant analytical exercises that help to understand:\n  - the propagation channels of these shocks,\n  - the policy trade-offs they imply,\n  - and the ensuing implications for the conduct of monetary policy.\n- Overall conclusion: the extent of economic characteristics and frictions in developing countries render them more vulnerable and constitute bigger challenges in monetary policy conduct relative to developed economies."
    },
    {
      "heading": "Analytical framework and exercises",
      "content": "- Framework: Quarterly Projection Model (QPM).\n- The exercises are designed to illuminate how weather shocks propagate through the economy and interact with monetary policy trade-offs.\n- Focus areas in the exercises include:\n  - transmission channels from agricultural supply disruptions to prices and output,\n  - role of exchange rate flexibility and monetary policy framework features,\n  - interaction between supply shocks and inflation dynamics in a QPM environment."
    },
    {
      "heading": "Key economic characteristics and frictions emphasized",
      "content": "- Weight of food expenditures in the consumption basket.\n- GDP share of the agriculture sector.\n- Degree of imports substituting for the damaged domestic agricultural supply.\n- Extent of inflation expectations’ anchoring and central bank credibility.\n- Specific characteristics of the monetary policy framework, including:\n  - degree of exchange rate flexibility,\n  - definition of the price stability objective."
    },
    {
      "heading": "Policy trade-offs and implications for monetary policy",
      "content": "- Weather shocks, being supply-side, create trade-offs for monetary policy between stabilizing inflation and supporting output.\n- The importance of central bank credibility and the anchoring of inflation expectations in mitigating adverse effects from supply shocks is highlighted.\n- The degree of exchange rate flexibility and the exact price stability objective influence how monetary policy can respond to weather-induced supply shocks."
    },
    {
      "heading": "Subject tags and keywords (as presented)",
      "content": "- Subject: Exchange rate arrangements, Exchange rates, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Monetary policy frameworks, Prices\n- Keywords: central bank credibility, Developing Countries, Exchange rate arrangements, Exchange rates, food inflation Phillips curve shock, Inflation, inflation expectation, Inflation targeting, Monetary Policy, monetary policy credibility, Monetary policy frameworks, policy trade-off, Quarterly Projection Model, Sub-Saharan Africa, Transmission Mechanism, weather shock, Weather Shocks\n\nSource: QPM-Based Analysis of Weather Shocks and Monetary Policy in Developing Countries, Valeriu Nalban and Luis-Felipe Zanna, May 23, 2025, IMF Working Paper.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824/bundle-manifest.json)",
    "Authors: Valeriu Nalban, Luis-Felipe Zanna",
    "Published: May 23, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229006279.001",
    "Weather-related shocks are of a supply-side nature and therefore present significant challenges for monetary policy.",
    "Using a Quarterly Projection Model (QPM) framework, the paper provides an overview of weather-relevant analytical exercises that help to understand:",
    "Overall conclusion: the extent of economic characteristics and frictions in developing countries render them more vulnerable and constitute bigger challenges in monetary policy conduct relative to developed economies.",
    "Framework: Quarterly Projection Model (QPM).",
    "The exercises are designed to illuminate how weather shocks propagate through the economy and interact with monetary policy trade-offs.",
    "Focus areas in the exercises include:",
    "Weight of food expenditures in the consumption basket.",
    "GDP share of the agriculture sector.",
    "Degree of imports substituting for the damaged domestic agricultural supply.",
    "Extent of inflation expectations’ anchoring and central bank credibility.",
    "Specific characteristics of the monetary policy framework, including:",
    "Weather shocks, being supply-side, create trade-offs for monetary policy between stabilizing inflation and supporting output.",
    "The importance of central bank credibility and the anchoring of inflation expectations in mitigating adverse effects from supply shocks is highlighted.",
    "The degree of exchange rate flexibility and the exact price stability objective influence how monetary policy can respond to weather-induced supply shocks.",
    "Subject: Exchange rate arrangements, Exchange rates, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Monetary policy frameworks, Prices",
    "Keywords: central bank credibility, Developing Countries, Exchange rate arrangements, Exchange rates, food inflation Phillips curve shock, Inflation, inflation expectation, Inflation targeting, Monetary Policy, monetary policy credibility, Monetary policy frameworks, policy trade-off, Quarterly Projection Model, Sub-Saharan Africa, Transmission Mechanism, weather shock, Weather Shocks",
    "**Working Paper**"
  ],
  "related": [
    {
      "title": "Working Paper",
      "role": "paper",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025095-print-pdf.pdf",
      "summary": {
        "path": "/-/media/files/publications/wp/2025/english/wpiea2025095-print-pdf.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/wp/2025/english/wpiea2025095-print-pdf.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824/index.md",
    "json": "/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824/index.json",
    "bundleManifest": "/en/publications/wp/issues/2025/05/23/qpm-based-analysis-of-weather-shocks-and-monetary-policy-in-developing-countries-565824/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T01:46:17.105Z"
}