Weather shocks and supply chains.

Abstract

We explore the impact of anomalous weather variations in exporting countries on supply chains in importing countries. Focussing on how changes in firms’ margins at different stages of supply chains are related, our theoretical framework shows that changes in margins can vary: in principle, they can change in different directions and increases and decreases in margins can co-exist. We derive anomalous temperature and precipitation measures for banana exporting countries as the source of the exogenous shock impacting on supply chains in four importing countries. Applying cumulative local projections impulse responses, our results indicate considerable variation in how margins in supply chains change. The significance of our results highlights that single-stage analysis of food and agricultural markets ignores potentially important distributional impacts within supply chains and uncovers the role of competition within and between stages of supply chains as being more complex than single-stage perspectives.