Climate pattern effects on global economic conditions

Gilles Dufrénot, William Ginn and Marc Pourroy

Economic Modelling, 2024, vol. 141, issue C

Abstract: This study investigates how El Niño–Southern Oscillation (ENSO) climate patterns affect global economic conditions. Prior research suggests that ENSO phases, particularly El Niño, influence economic outcomes, but with limited consensus on their broader macroeconomic impacts. Using a novel monthly dataset from 20 economies, covering 80% of global output from 1999 to 2022, we employ a global augmented vector autoregression with local projections (GAVARLP) model. The empirical findings suggest that El Niño boosts output with minimal inflationary effects, reducing global economic policy uncertainty, while La Niña raises food inflation, which can amplify aggregate inflation as a “second-round” effect, amplifying uncertainty. These findings shed light on the transmission channels of climate shocks and highlight the significant role of ENSO in shaping global economic conditions, emphasizing why climate shocks should be a concern for policy markers.

Keywords: Climate (ENSO); Oil prices; Food prices; Global macroeconometric modeling; Economic policy uncertainty (search for similar items in EconPapers)
JEL-codes: C32 F44 O13 Q54 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Climate pattern effects on global economic conditions (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:141:y:2024:i:c:s0264999324002773

DOI: 10.1016/j.econmod.2024.106920

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