The Impact Of Climate On International Trade

The widespread impact of climate on natural and human system has been an issue of dispute for decades.More emphasis was given on scrutinizing the climate-economy relationship.International trade,one of the important part of the economy,attained the attention regarding its association with climate shocks.The purpose of this study is to investigate this relationship using trade,temperature and rainfall data from 1992 to 2016 covering 45 Asian countries.Feasible Generalized Least Square(FGLS)is used to estimate the impacts of climate on international trade between Asian countries and China.This study finds that,for Asian countries,export growth rate and import growth rate are inversely associated with temperature.If temperature increases 1?,export growth rate of Asian countries to China reduces by 3.62 percentage points and import growth rate from China reduces by 7.81 percentage points.In terms of annual rainfall,if annual rainfall increases by 100 mm,import growth rate in Asian countries from China decreases by 0.25 percentage points.Using interaction terms of climate variables and country-specific characteristic dummies,this study further finds that export growth rate reduces in hot,tropical and coastal countries due to higher temperature while as rainfall increases,export growth rate reduces in poor and agricultural countries but increases in island countries.In terms of import,higher temperature reduces import growth rate in all specific countries but rainfall has significantly negative effect only in poor,agriculture and coastal countries.Tropical region is found to be the most vulnerable region.For specific types of trade products,agricultural,manufacturing and industrial products are significantly affected by climate shocks in Asia.