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Assessing the Macroeconomic Impacts of Stochastic Climate Shocks in Paraguay
This paper examines the macroeconomic consequences of climate shocks in Paraguay, a small and open agricultural exporter that is highly exposed to droughts and floods. Utilizing a modified version of the World Bank’s Macro-Fiscal Model, the analysis integrates stochastic climate shocks drawn from external biophysical models to assess the impacts of extreme weather events such as droughts, heatwaves and floods on agriculture and livestock production and labor productivity in Paraguay. The findings reveal significant vulnerabilities in agricultural outputs and exports across a range of climate scenarios. The paper presents a comprehensive analysis across different climate scenarios ranging from mild to severe and quantifies the range of potential impacts on key economic indicators.
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