Precipitation Anomalies and Changes in Private Credit across Asia-Pacific Economies

Abstract

Weather shocks can increase financing needs while simultaneously weakening income, collateral, investment, and repayment capacity, leaving their net effect on aggregate credit ambiguous. This paper examines whether annual precipitation anomalies are associated with subsequent changes in domestic credit to the private sector across Asia-Pacific economies. We combine GPCC Precipitation Analysis Monthly v2025 with World Development Indicators, UN M49, and fixed Natural Earth boundaries. The resulting unbalanced panel contains 950 economy-year observations for 49 economies over 2000-2024. Exposure is an annual dryness anomaly relative to each economy’s 1991-2020 mean precipitation, and the outcome is the change in private credit as a share of GDP from year t to t+1. Two-way fixed-effects estimates with economy-clustered standard errors are negative but imprecise. In the controlled specification, a 10-percentage-point increase in dryness is associated with a 0.233-percentage-point lower subsequent credit-to-GDP change (95% CI: -0.548 to 0.082). The point estimate remains negative under extended controls, an alternative exposure scale, economy-specific trends, and leave-one-economy-out checks, although inference is sensitive to the covariance estimator. Because the primary confidence interval includes zero and the outcome is an aggregate credit-to-GDP measure, the evidence supports a bounded country-level association rather than a causal or bank-supply interpretation. The study provides a reproducible public-data benchmark for aggregate weather-credit relationships in the region.