IDEAS home Printed from https://ideas.repec.org/p/bdr/borrec/1085.html
   My bibliography  Save this paper

Nonlinear relationship between the weather phenomenon El Niño and Colombian food prices

Author

Listed:
  • Davinson Stev Abril Salcedo
  • Luis Fernando Melo-Velandia

    (Banco de la República de Colombia)

  • Daniel Parra-Amado

    (Banco de la República de Colombia)

Abstract

Extreme weather events, like a strong El Niño (ENSO), affect society in many different ways especially in the context of recent globe warming. In the Colombian case, ENSO had a significant impact on consumer food prices during the strongest event in 2015-16. Our research evaluates the relationship between ENSO and Colombian food inflation growth by using a smooth transition non-linear model. We estimate the impacts of a strong ENSO on food inflation growth by adopting Generalized Impulse Response Functions (GIRFs) and the results suggest that the weather shocks are transitory and asymmetric on inflation. A strong El Niño shock has a significate effect on the food inflation growth from six to nine months after the shock and the accumulated elasticity is close to 465 basic points. We build the GIRFs for eight different episodes associated with a strong El Niño in the period corresponding from March 1962 to December 2018 and there is no evidence of changes in the size of Colombian food inflation growth responses over time. **** RESUMEN: Eventos extremos del clima como El Niño (ENSO) fuerte afectan la sociedad de diferentes maneras en especial en el reciente contexto de calentamiento global. En 2015-16, se observó el evento de El Niño más fuerte en los últimos cien años el cual presentó un impacto significativo sobre los precios de alimentos al consumidor en el caso colombiano. El presente trabajo de investigación evalúa la relación entre ENSO y el crecimiento de la inflación de alimentos para el consumidor en Colombia usando un modelo no lineal de transición suave y estimando funciones de impulso respuesta generalizadas (GIRFs). Los resultados sugieren que dichos choques climáticos son transitorios y asimétricos sobre la inflación. Así, El Niño fuerte tiene un impacto significativo sobre el crecimiento de la inflación de alimentos entre seis y nueve meses después del choque climático y la elasticidad acumulada es 465 puntos básicos. Adicionalmente, se construyeron GIRFs para ocho diferentes episodios de tiempo asociados con un fenómeno de El Niño fuerte que se observaron entre marzo de 1962 y diciembre de 2018 y se encontró que no hay evidencia estadística de cambios en el tamaño de las respuestas del crecimiento de la inflación de alimentos en Colombia a través del tiempo.

Suggested Citation

  • Davinson Stev Abril Salcedo & Luis Fernando Melo-Velandia & Daniel Parra-Amado, 2019. "Nonlinear relationship between the weather phenomenon El Niño and Colombian food prices," Borradores de Economia 1085, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:1085
    DOI: 10.32468/be.1085
    as

    Download full text from publisher

    File URL: https://doi.org/10.32468/be.1085
    Download Restriction: no

    File URL: https://libkey.io/10.32468/be.1085?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pierre Dubois & Bruno Jullien & Thierry Magnac, 2008. "Formal and Informal Risk Sharing in LDCs: Theory and Empirical Evidence," Econometrica, Econometric Society, vol. 76(4), pages 679-725, July.
    2. Bessec, Marie & Fouquau, Julien, 2008. "The non-linear link between electricity consumption and temperature in Europe: A threshold panel approach," Energy Economics, Elsevier, vol. 30(5), pages 2705-2721, September.
    3. Dick van Dijk & Timo Terasvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models — A Survey Of Recent Developments," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 1-47.
    4. Toshichika Iizumi & Jing-Jia Luo & Andrew J. Challinor & Gen Sakurai & Masayuki Yokozawa & Hirofumi Sakuma & Molly E. Brown & Toshio Yamagata, 2014. "Impacts of El Niño Southern Oscillation on the global yields of major crops," Nature Communications, Nature, vol. 5(1), pages 1-7, September.
    5. Allan D. Brunner, 2002. "El Niño and World Primary Commodity Prices: Warm Water or Hot Air?," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 176-183, February.
    6. Germán ROMERO OTALORA & Sioux Fanny MELO LEON & Leidy Cáterin RIVEROS SALCEDO & Andrés Camilo ÁLVAREZ & Carolina DIAZ GIRALDO & Silvia Liliana CALDERON DIAZ, 2017. "Efectos económicos de futuras sequías en Colombia: Estimación a partir del Fenómeno El Nino 2015," Archivos de Economía 15851, Departamento Nacional de Planeación.
    7. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 209-244.
    8. Ubilava, David & holt, Matt, 2013. "El Ni~no southern oscillation and its effects on world vegetable oil prices: assessing asymmetries using smooth transition models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(2), pages 1-25.
    9. Cashin, Paul & Mohaddes, Kamiar & Raissi, Mehdi, 2017. "Fair weather or foul? The macroeconomic effects of El Niño," Journal of International Economics, Elsevier, vol. 106(C), pages 37-54.
    10. Andrea Bastianin & Alessandro Lanza & Matteo Manera, 2018. "Economic impacts of El Niño southern oscillation: evidence from the Colombian coffee market," Agricultural Economics, International Association of Agricultural Economists, vol. 49(5), pages 623-633, September.
    11. Chen, Chi-Chung & McCarl, Bruce A., 2000. "The Value Of Enso Information To Agriculture: Consideration Of Event Strength And Trade," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-18, December.
    12. Robert Sollis & Stephen Leybourne & Paul Newbold, 1999. "Unit Roots and Asymmetric Smooth Transitions," Journal of Time Series Analysis, Wiley Blackwell, vol. 20(6), pages 671-677, November.
    13. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
    14. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    15. Chimeli, Ariaster B. & De Souza Filho, Francisco De Assis & Holanda, Marcos Costa & Petterini, Francis Carlo, 2008. "Forecasting the impacts of climate variability: lessons from the rainfed corn market in Ceará, Brazil," Environment and Development Economics, Cambridge University Press, vol. 13(2), pages 201-227, April.
    16. Berry, Brian J.L. & Okulicz-Kozaryn, Adam, 2008. "Are there ENSO signals in the macroeconomy," Ecological Economics, Elsevier, vol. 64(3), pages 625-633, January.
    17. Headey, Derek & Fan, Shenggen, 2010. "Reflections on the global food crisis: How did it happen? How has it hurt? And how can we prevent the next one?," Research reports 165, International Food Policy Research Institute (IFPRI).
    18. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    19. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
    20. Eitrheim, Oyvind & Terasvirta, Timo, 1996. "Testing the adequacy of smooth transition autoregressive models," Journal of Econometrics, Elsevier, vol. 74(1), pages 59-75, September.
    21. Andalón, Mabel & Azevedo, João Pedro & Rodríguez-Castelán, Carlos & Sanfelice, Viviane & Valderrama-González, Daniel, 2016. "Weather Shocks and Health at Birth in Colombia," World Development, Elsevier, vol. 82(C), pages 69-82.
    22. Daniel Parra-Amado & Davinson Stev Abril-Salcedo & Luis Fernando Melo-Velandia, 2016. "Impactos de los fenómenos climáticos sobre el precio de los alimentos en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 34(80), pages 146-158, June.
    23. Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June.
    24. Ubilava, David, 2013. "El Niño Southern Oscillation and Primary Agricultural Commodity Prices: Causal Inferences from Smooth Transition Models," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152202, Australian Agricultural and Resource Economics Society.
    25. David Ubilava, 2012. "Modeling Nonlinearities in the U.S. Soybean‐to‐Corn Price Ratio: A Smooth Transition Autoregression Approach," Agribusiness, John Wiley & Sons, Ltd., vol. 28(1), pages 29-41, January.
    26. Mario Miranda & Dmitry V. Vedenov, 2001. "Innovations in Agricultural and Natural Disaster Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 650-655.
    27. González-Molano, Eliana Rocío & Jalil-Barney, Munir Andrés & Romero-Chamorro, José Vicente, 2011. "Inflación y expectativas de inflación en Colombia," Chapters, in: López Enciso, Enrique & Ramírez Giraldo, María Teresa (ed.), Formación de precios y salarios en Colombia T.2, volume 2, chapter 13, pages 491-519, Banco de la Republica de Colombia.
    28. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    29. David Ubilava, 2012. "El Niño, La Niña, and world coffee price dynamics," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 17-26, January.
    30. Teräsvirta, Timo, 1996. "Smooth Transition Models," SSE/EFI Working Paper Series in Economics and Finance 132, Stockholm School of Economics.
    31. Solomon M. Hsiang & Kyle C. Meng & Mark A. Cane, 2011. "Civil conflicts are associated with the global climate," Nature, Nature, vol. 476(7361), pages 438-441, August.
    32. repec:dau:papers:123456789/8180 is not listed on IDEAS
    33. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arellano Gonzalez Jesus & Juárez-Torres Miriam & Zazueta Borboa Francisco, 2023. "Weather Shocks, Prices and Productivity: Evidence from Staples in Mexico," Working Papers 2023-16, Banco de México.
    2. Arellano-Gonzalez, Jesus & Juarez-Torres, Miriam & Zazueta-Borboa, Francisco, 2021. "Temperature shocks and local price changes of agricultural products: panel data evidence from Mexico," 2021 Annual Meeting, August 1-3, Austin, Texas 314060, Agricultural and Applied Economics Association.
    3. Julián Alonso Cárdenas-Cárdenas & Deicy J. Cristiano-Botia & Nicolás Martínez-Cortés, 2023. "Colombian inflation forecast using Long Short-Term Memory approach," Borradores de Economia 1241, Banco de la Republica de Colombia.
    4. Luis Guillermo Becerra-Valbuena & Jorge A. Bonilla, 2021. "Climatic shocks, air quality, and health at birth in Bogotá," Working Papers halshs-03429482, HAL.
    5. Romero, José Vicente & Naranjo-Saldarriaga, Sara, 2024. "Weather shocks and inflation expectations in semi-structural models," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(2).
    6. Valeria Bejarano-Salcedo & Juan Manuel Julio-Román & Edgar Caicedo-García & Julián Alonso Cárdenas-Cárdenas, 2020. "Entendiendo, Modelando y Pronosticando el Efecto de “El Niño” Sobre los Precios de los Alimentos: El Caso Colombiano," Borradores de Economia 1102, Banco de la Republica de Colombia.
    7. Luis Guillermo Becerra-Valbuena & Jorge A. Bonilla, 2021. "Climatic shocks, air quality, and health at birth in Bogotá," PSE Working Papers halshs-03429482, HAL.
    8. Arellano Gonzalez Jesus & Juárez-Torres Miriam & Zazueta Borboa Francisco, 2023. "Temperature shocks and their effect on the price of agricultural products: panel data evidence from vegetables in Mexico," Working Papers 2023-02, Banco de México.
    9. Gilles Dufrénot & William Ginn & Marc Pourroy, 2021. "The Effect of ENSO Shocks on Commodity Prices: A Multi-Time Scale Approach," Working Papers halshs-03225070, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel Parra-Amado & Davinson Stev Abril-Salcedo & Luis Fernando Melo-Velandia, 2016. "Impactos de los fenómenos climáticos sobre el precio de los alimentos en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 34(80), pages 146-158, June.
    2. Ubilava, David, 2017. "The ENSO Effect and Asymmetries in Wheat Price Dynamics," World Development, Elsevier, vol. 96(C), pages 490-502.
    3. Atems, Bebonchu & Sardar, Naafey, 2021. "Exploring asymmetries in the effects of El Niño-Southern Oscillation on U.S. food and agricultural stock prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 1-14.
    4. Luis Fernando Melo‐Velandia & Camilo Andrés Orozco‐Vanegas & Daniel Parra‐Amado, 2022. "Extreme weather events and high Colombian food prices: A non‐stationary extreme value approach," Agricultural Economics, International Association of Agricultural Economists, vol. 53(S1), pages 21-40, November.
    5. Zhu, Yichen & Ghoshray, Atanu, 2021. "Climate Anomalies and Its Impact on U.S. Corn and Soybean Prices," 2021 Conference, August 17-31, 2021, Virtual 315271, International Association of Agricultural Economists.
    6. Andrea Bastianin & Alessandro Lanza & Matteo Manera, 2018. "Economic impacts of El Niño southern oscillation: evidence from the Colombian coffee market," Agricultural Economics, International Association of Agricultural Economists, vol. 49(5), pages 623-633, September.
    7. David Ubilava, 2014. "El Niño Southern Oscillation and the fishmeal–soya bean meal price ratio: regime-dependent dynamics revisited," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 41(4), pages 583-604.
    8. Salisu, Afees A. & Gupta, Rangan & Nel, Jacobus & Bouri, Elie, 2022. "The (Asymmetric) effect of El Niño and La Niña on gold and silver prices in a GVAR model," Resources Policy, Elsevier, vol. 78(C).
    9. Smith, Sarah C. & Ubilava, David, 2017. "The El Niño Southern Oscillation and Economic Growth in the Developing World," Working Papers 2017-11, University of Sydney, School of Economics, revised May 2017.
    10. David Ubilava, 2018. "The Role of El Niño Southern Oscillation in Commodity Price Movement and Predictability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 239-263.
    11. Hernan Botero & Andrew P. Barnes, 2022. "The effect of ENSO on common bean production in Colombia: a time series approach," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 14(6), pages 1417-1430, December.
    12. Emediegwu, Lotanna Ernest, 2023. "Assessing the (a)symmetric effect of global climate anomalies on food prices: Evidence from local prices," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334555, Agricultural Economics Society - AES.
    13. David Ubilava, 2012. "El Niño, La Niña, and world coffee price dynamics," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 17-26, January.
    14. Checo, Ariadne & Mejía, Mariam & Ramírez, Francisco A., 2017. "El rol de los regímenes de precipitaciones sobre la dinámica de precios y actividad del sector agropecuario de la República Dominicana durante el período 2000-2016 [The role of rainfall regimes on ," MPRA Paper 80301, University Library of Munich, Germany.
    15. Gilles Dufrénot & William Ginn & Marc Pourroy, 2023. "ENSO Climate Patterns on Global Economic Conditions," AMSE Working Papers 2308, Aix-Marseille School of Economics, France.
    16. Ubilava, David, 2013. "El Niño Southern Oscillation and Primary Agricultural Commodity Prices: Causal Inferences from Smooth Transition Models," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152202, Australian Agricultural and Resource Economics Society.
    17. Rémi Generoso & Cécile Couharde & Olivier Damette & Kamiar Mohaddes, 2020. "The Growth Effects of El Niño and La Niña: Local Weather Conditions Matter," Annals of Economics and Statistics, GENES, issue 140, pages 83-126.
    18. David Ubilava & Matt Holt, 2013. "El Niño southern oscillation and its effects on world vegetable oil prices: assessing asymmetries using smooth transition models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(2), pages 273-297, April.
    19. Cashin, Paul & Mohaddes, Kamiar & Raissi, Mehdi, 2017. "Fair weather or foul? The macroeconomic effects of El Niño," Journal of International Economics, Elsevier, vol. 106(C), pages 37-54.
    20. Sandberg, Rickard, 2016. "Trends, unit roots, structural changes, and time-varying asymmetries in U.S. macroeconomic data: the Stock and Watson data re-examined," Economic Modelling, Elsevier, vol. 52(PB), pages 699-713.

    More about this item

    Keywords

    El Niño Southern Oscillation (ENSO); non-linear smooth transition models; inflation; El Niño-Oscilación del Sur; modelos no lineales de transición suave; inflación;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdr:borrec:1085. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Clorith Angélica Bahos Olivera (email available below). General contact details of provider: https://edirc.repec.org/data/brcgvco.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.