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© 2025 International Monetary Fund
WP/25/4
IMF Working Paper
Western Hemisphere Department
The Macroeconomic Impact of Droughts in Uruguay: A General Equilibrium Analysis Using the Soil
Moisture Deficit Index Prepared by Jean François Clevy and Christopher Evans*
Authorized for distribution by Mauricio Villafuerte
January 2025
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: Uruguay recently confronted the impact of a once-in-a-century severe drought, which affected key agricultural areas, and caused significant direct losses to the agricultural sector, especially for soybean production and cattle farming – important exports in Uruguay’s trade matrix. From October 2022 to April 2023, rainfall was about 47 percent below historical averages, contributing to a decline in agricultural output and impacting overall GDP growth. The frequency of recent climate shocks witnessed in Uruguay combined with its rich climate data make it the ideal candidate to understand if weather shocks matter and through which transmission mechanisms. Using the empirical and theoretical framework outlined in Gallic and Vermandel (2020) we document that weather shocks play an important role in business cycle dynamics in Uruguay.
| JEL Classification Numbers: | E32; Q54 |
| Keywords: | Weather shocks; Business cycles; Uruguay |
| Author’s E-Mail Address: | JClevyaguilar@imf.org and CEvans@imf.org |
| JEL Classification Numbers: | E32; Q54 |
| Keywords: | Weather shocks; Business cycles; Uruguay |
| Author’s E-Mail Address: | JClevyaguilar@imf.org and CEvans@imf.org |
Title Page
WORKING PAPERS
The Macroeconomic Impact of Droughts in Uruguay
A General Equilibrium Analysis Using the Soil Moisture Deficit Index
Prepared by Jean François Clevy and Christopher Evans
The views expressed here are those of the authors and do not necessarily represent those of the IMF, its Management and Executive Board, or IMF policy. We are grateful for the continued guidance and support of Pau Rabanal and discussions with Emilio Fernández Corugedo. We would like to thank the Uruguayan authorities for their continuous help and impactful comments, especially the Instituto Nacional de Investigación Agropecuaria (INIA), Oficina de Programación y Política Agropecuaria (OPYPA), Ministerio de Economia y Finanzas (MEF), Banco Central del Uruguay (BCU) and seminar participants at the BCU and the BCU’s XXXIX Jornadas Anuales de Economía conference where this work was presented. We would also like to thank participants at the IMF WHD Climate Group seminar for their helpful feedback. The work benefited from outstanding research support from Roberta Guarnieri.