QUANTILE REGRESSION ANALYSIS OF CLIMATE-INDUCED INFLATION AND ITS IMPLICATIONS FOR ALGERIA’S ECONOMIC STABILITY AND NATIONAL SECURITY

Abstract

This research investigates the nexus between inflation and meteorological factors in Algeria, a nation whose economy is highly susceptible to climatic variations and fluctuations in the global energy market. This study highlights the importance of environmental variables in affecting pricing changes and fluctuations. This is because climate-related disasters are happening more regularly and might hurt the economy. Specifically, the study aims to investigate the impact of variations in average temperature and rainfall on inflation. It also makes policy suggestions that are meant to make the economy more stable, improve national security, and encourage economic diversification.

Quantile regression approach is used to investigate the impact of climatic factors across varying inflation levels, providing a more refined view than conventional mean-based methodologies. The results that average temperature has a significant impact on inflation while it is low, but this effect is less as inflation increases. This suggests that climate-driven pressures are stronger when circumstances are stable. In contrast, average rainfall has little and erratic impact across all quantiles, underscoring its restricted influence on Algeria's inflationary trends. These findings show that policymakers need to put temperature-related risks at the top of their decision-making priorities. For future studies, it’s possible to implement climatic factors in traditional models in which inflation is a dependent variable, especially for Algeria.