On the Effect of Rainfall Variations on Economic Variables: The Application of General Equilibrium Model

The economy of Iran is dependent on many variables that play a role in its growth and development. On the other hand, rainfall is one of the important factors of climate change that has affected economic strategic programs including those of the agricultural sector. Rainfall variations impact many economic variables, some of which are explored here. The aim of this study was to evaluate rainfall shocks on some economic variables using a general equilibrium model that included the best scenario representing the highest rainfall, the worst scenario representing the lowest rainfall, and normal scenario considering average rainfall. To check the effect of these changes on the agricultural sector, a set of commodities produced by this section is considered separately, and other sections are considered in general. The results showed that the production of these commodities has been increased by about 14% in the best rainfall scenario. All commodities have been faced with reduced consumption from 0.3% to 10.3% in the worst rainfall scenario; this was the greatest loss of products related to the agricultural commodities. Rainfall increased the price of all commodities by 0.25-28.7%, except for industry. Both private and public investments were influenced by rainfall change.