The impact of climate change on inflation in Tunisia: evidence from the asymmetric NARDL model

This paper aims to examine the relationship between climate shocks and agri-food and overall inflation in Tunisia for the period 1985-2000. Climate shocks represent extreme weather phenomena such as droughts, heat waves, and floods To address this question, the paper uses an extensive Nonlinear Autoregressive Distributed Lag (NARDL) model that incorporates a Pesaran cointegration test, enabling the exploration of potential asymmetric effects stemming from positive and negative climate shocks on both general and agri-food inflation in the short and the long run. The key findings of the paper indicate that positive temperature shocks exert a significant inflationary impact on all agricultural products, the food industry, and, more broadly, the entire Tunisian economy, both in the short and long term. Conversely, a sudden shortage in rainfall does not significantly affect either agricultural or food prices, nor does it influence the general price index. This result is rather unexpected since long-term rainfall trends significantly affect agricultural production, emphasizing the importance of appropriate agricultural policies such as irrigation.