Forecasting the impacts of climate variability: lessons from the rainfed corn market in Ceará, Brazil

Abstract

A number of studies show that climatic shocks have significant economic impacts in several regions of the world, especially in, but not limited to, developing economies. In this paper we focus on a drought-related indicator of well-being and emergency spending in the Brazilian semi-arid zone – rainfed corn market – and estimate aggregate behavioral and forecast models for this market conditional on local climate determinants. We find encouraging evidence that our approach can help policy makers buy time to help them prepare for drought mitigating actions. The analysis is applicable to economies elsewhere in the world and climatic impacts other than those caused by droughts.