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Rainfall Variability and Macroeconomic Performance:A Case Study of India, 1952–2013 <Preliminary Version>

Nomoto, Takaaki (2016): Rainfall Variability and Macroeconomic Performance:A Case Study of India, 1952–2013 <Preliminary Version>.

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Abstract

The present and emerging climate change highlights the need to understand the impact of weather shocks on the economy in the context of macroeconomic dynamism. In this regard, the present paper develops an empirical framework applicable to macro-data such as GDP to distinguish the impact of weather shocks on agricultural production, the indirect impact on non-agricultural production through its impact on agriculture, and the direct impact on non-agricultural production. For policymakers, distinguishing the direct and indirect impact on non-agriculture is critical in deciding the proper and efficient allocation of limited resources to adaptation and mitigation efforts. The present paper applies the developed framework to assess the impact of rainfall variability on India’s macroeconomic performance during 1952 to 2013 as a case study, finding that rainfall’s impact on non-agriculture is mostly rooted in its impact on agriculture. In this way, the paper contributes to the growing climate-economy literature.

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