The Impact of Weather Variability on Economic Growth in Kenya

Abstract

The effect of weather and climate variability on economic performance is ordinarily estimated using simulation models that predict the magnitude of long-term implications under normal and adverse scenarios. These models do not provide information that can enable policy within the short-run. Understanding how weather behaviour can influence economic growth over short periods is particularly important in predicting future economic performance of an economy. This paper set to explore the influence of weather change on economic performance in Kenya. The time series data from the World Development Indicator and the World Bank climate change portal for the last 50 years (1964-2013) was used. Upon carrying out various time series diagnostics tests, analysis was done based on the Vector Error Correction Model. The results showed that total rainfall had a negative relationship with gross domestic product while change in temperature indicated a positive relationship; however the magnitude of these relationships differed by magnitude. Change in human capital formation resulted to a negative contribution on gross domestic product per capita growth because increase in knowledge leads to massive production that increases carbon dioxide gas concentration in the atmosphere, which has economic implications. Finally, change in the total population parameter indicated that the magnitude of output decreases with increase in population. The study recommends that appropriate measures are put in place to help the vulnerable poor to adapt and to mitigate in the face of weather variability.