Weather Impacts Over the Colombian Food Inflation

• Activity Number: 706
• Type: Contributed
• Date/Time: Thursday, August 4, 2016 : 10:30 AM to 12:20 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Luis Melo* and Daniel Parra and Stev Abril
• Companies: Banco de la República de Colombia and Banco de la República de Colombia and Banco de la República de Colombia
• Keywords: Weather anomalies ; non-linear smooth transition models ; generalized impulse response function ; food inflation

Abstract

This paper estimates the impacts of weather conditions (mainly, "El Niño" and "La Niña" effects) on Colombian food inflation growth. We use generalized impulse response functions for a smooth transition non-linear model that includes food inflation and the sea surface temperature index (SST v3.4). In this study, the data were obtained from the monthly period between June 1995 and May 2015. The results suggest that the weather shocks are transitory and asymmetric. In particular, a strong and positive shock, associated to "El Niño" phenomenon, has a significant effect on the food inflation growth and produces a 100 basis points increment five months later.